Northern Technologies International Corporation Annual Report 2020

FY2020 Annual Report · Northern Technologies International Corporation

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Northern Technologies
International Corporation
Fiscal 2020 Annual Report

Northern Technologies International Corporation

• Notice of 2021 Annual Meeting
• Proxy Statement
• Annual Report on Form 10-K - August 31, 2020

Our Mission:

Our Environment:

Our business model of commercializing clean and green
technologies depends heavily on the talents, perseverance and
integrity of both our employees and our worldwide federation of
joint venture partners. We believe that our responsibilities are
first to our worldwide customers, then to our people, next to our
communities and finally to our shareholders. Therefore we must:

• Exercise honor, humanity and disciplined management

in our actions.

• See a unified world through the global perspectives

of our people.

• Ensure that the environment becomes a better place because

of what we do.

• Invest continuously in our future.

NTIC uses advanced technologies to care for the world we live in,
give back to society and strive to set an example for environmental
leadership and responsibility.

At NTIC, we believe that there is no alternative to doing
environmentally sustainable business while working to grow the
bottom line.

We encourage our employees, joint venture partners, distributors,
affiliates and suppliers
to carry out our environmental
commitments at the individual level through:

• Environmentally responsible business practices.
• Advanced R&D processes that promote the use of

environmentally responsible raw materials.

• Selecting components and manufacturing processes that reduce

waste and an impact on the environment.

• Raising awareness about our technologies and how they can

help solve current environmental challenges.

• Each NTIC employee is expected to practice an individual

commitment to sustainability and environmental responsibility
in the workplace.

lessen our environmental
Through our commitments to
footprint and our advanced technologies which allow others to
practice sustainability, we have the power to benefit ourselves
as individuals, our federation of NTIC joint ventures and our
environment for many generations to come.

Our Technology Platforms:

ZERUST®/EXCOR® manufactures and markets corrosion inhibiting technologies that
provide customers with advanced solutions for corrosion across their production facilities
and supply chains. The technology uses proprietary chemical systems to create invisible
molecular corrosion shields on metal surfaces. The ZERUST®/EXCOR® teams support
clients globally in a broad range of industries including automotive, electrical, electronic,
medical, machine fabrications, steel production, military and marine. ZERUST®/EXCOR®
products and services allow customers to achieve substantial cost savings as well as
reduce the negative environmental impact caused by traditional corrosion prevention
methods and the waste caused by the corrosion of metal assets.

Zerust® Oil & Gas provides advanced corrosion control technologies and services to the
petrochemical industry. Zerust® Oil & Gas products and services utilize Zerust® proprietary
corrosion inhibitors in combination with advanced cathodic protection systems to
dramatically enhance the corrosion protection of capital assets. These assets include
above-ground storage tanks, various pieces of process equipment, buried and submerged
pipelines, mothballed large capital equipment, pipeline flanges, valves, and welded joints.
Zerust® Oil & Gas technologies are currently implemented in refineries, offshore oil rigs,
tank farms and retail gas stations in several countries.

Natur-Tec® engineers and manufactures biobased and biodegradable plastic resins
intended to replace conventional, petroleum-based plastics. Natur-Tec® has a broad
bioplastics portfolio which spans flexible film, foam, rigid injection molded materials
and engineered plastics. These applications allow for the production of 100% certified
compostable finished products, such as bags, food service products, and product
packaging. Natur-Tec® products are renewable resource based and do not contain
conventional plastic materials. Natur-Tec® products provide sustainable alternatives to
conventional plastics and enable industry and consumers to move closer to a carbon
neutral footprint.

To the Stockholders of Northern Technologies International Corporation (NTIC),

Despite the ongoing COVID-19 pandemic, which had a material impact on our business for a significant portion
of fiscal 2020, NTIC’s fourth quarter and full year financial results illustrate the resiliency of our global business
model and our ability to navigate unprecedented market conditions. I am extremely proud of our response to
these challenges, and our commitment to safely providing uninterrupted service to our customers worldwide.
Key to our success has been the members of our experienced management team, who are all veterans of multiple
market cycles, including the Great Recession of 2008 – 2009. The lessons learned during these earlier periods
of uncertainty helped to hone our tactics and operating strategies for successfully steering through the current
crisis.

Our asset-light business model not only allows us to react quickly to changes in our end markets, but also
produces strong free cash flow. We ended fiscal 2020 with no debt, $6,403,000 in cash and cash equivalents and
$5,545,000 in available for sale securities. Given the cyclical nature of many of our end markets, we believe it is
important to maintain a strong balance sheet. Out of an abundance of caution, we also suspended our $0.065
per share quarterly cash dividend on April 23, 2020. Once the coronavirus is in full retreat and the path towards
a sustained macroeconomic recovery becomes clearer, we hope to reinstate our quarterly cash dividend in fiscal
2021.

NTIC’s consolidated net sales for fiscal 2020 were $47,639,000. The 14.5% annual decrease was due to reduced
demand across the Company’s global customer base caused by the continued global manufacturing recession
that was first initiated by various trade wars and then dramatically exacerbated by the pandemic. As a result, for
fiscal 2020, Natur-Tec® sales declined 25.1%, ZERUST® sales to our joint ventures declined 24.3%, and ZERUST®
industrial sales declined 9.5%. Partially offsetting these trends were slightly higher sales of ZERUST® Oil & Gas
products.

Challenging global market conditions throughout fiscal 2020 also impacted the financial performance across
many of our joint ventures. Lower joint venture sales had a material impact on our NTIC’s joint venture operating
income, which decreased 31.4% to $8,883,000, compared to joint venture operating income of $12,953,000
during the fiscal year ended August 31, 2019.

The $4,070,000 year-over-year decline in annual joint venture operating income had a material impact on net
income attributable to NTIC. Consequently, the Company reported a net loss attributable to NTIC of $1,338,000,
or $0.15 per diluted share, compared to net income attributable to NTIC of $5,210,000, or $0.55 per diluted
share, for the same period last fiscal year. The net loss attributable to NTIC for fiscal year 2020 included a one-
time $1.6 million non-cash adjustment to the Company’s U.S. deferred tax asset, which was required to remove
the net U.S. deferred tax asset from NTIC’s balance sheet.

While we prudently reduced operating expenses in fiscal 2020 by 3.4% over the prior fiscal year, we continued
to support our research and development (R&D) efforts and invested nearly $4,000,000 during fiscal 2020. R&D
efforts are focused on further expanding our leadership position within our large and global end markets. In
addition, during fiscal 2020, we maintained our sales and marketing organization, which we believe will be to
NTIC’s advantage should, as we anticipate, our markets start rebounding towards pre-COVID levels in the coming
quarters.

ZERUST® Industrial Corrosion Prevention
The negative impact of the worldwide COVID-19 crisis was clearly visible in ZERUST® industrial sales throughout
fiscal 2020 both in North America and across the territories served by our global joint ventures. Sales by our
joint ventures decreased approximately 24.1% to $87,030,000 during the fiscal year ended August 31, 2020,
compared to $114,635,000 for the fiscal year ended August 31, 2019.

Net sales at our wholly owned NTIC China subsidiary rebounded quickly during the second half of fiscal 2020 and
thereby, increased by 2.9% for the full year to an annual record of $13,404,000, despite having endured COVID-19
shutdowns during the second quarter of fiscal 2020. In addition, NTIC China sales continued to demonstrate
improving sales trends since bottoming in March 2020. We believe sales at NTIC China continued to benefit
from new customer development efforts as well as our successful expansion into non-automotive markets. We
estimate the percent of automotive sales at NTIC China declined from 80% in fiscal 2019 to under 70% in fiscal
2020. Overall, we have a strong and motivated team at NTIC China, and we believe we are well positioned to
increase our scale within the large and growing China market.

Outside of NTIC China, ZERUST® industrial sales trends have also started to rebound from the coronavirus. After
ZERUST® industrial sales bottomed during the fiscal 2020 third quarter, sales in the fiscal 2020 fourth quarter
increased by 10.5%. We are optimistic that the start of fiscal 2021 will show continued positive trends, as all of
our global markets reopen and transition from convalescence to new growth.

ZERUST® in the Oil & Gas Industry
ZERUST® Oil & Gas sales remain volatile, primarily due to the market’s long sales cycle and overall challenging
conditions. In addition, during the COVID-19 crisis, lockdowns and travel restrictions made implementations at
client sites challenging. Despite these market disruptions, Oil & Gas sales for fiscal 2020 increased 2.0% over the
prior fiscal year to $2,783,000.

The oil and gas industry remains an important component of our long-term growth plan as it is the largest
corrosion market globally. Over the past ten years, NTIC has developed a portfolio of compelling corrosion
prevention solutions that includes products that protect the asset integrity of aboveground storage tanks,
pipelines, offshore rigs and platforms, mothballed equipment, spare parts, and retail gas stations. We are also
installing our solutions at more customer sites globally including recent expansions to include customers in
Africa and parts of the Middle East and Europe, where we have not been previously. As a result, NTIC oil and gas
solutions have been implemented in over ten new countries in just the past five years.

While it has taken longer than expected, we believe ZERUST® Oil & Gas is becoming a known brand throughout
the oil and gas industry. As we have mentioned previously, we are working with both NACE International and
the American Petroleum Institute (API) to get VCI based corrosion prevention technologies officially recognized
and approved as standard solutions for oil storage tanks. The COVID-19 crisis has temporarily delayed this
process, but the field data we are producing alongside our customers continues to validate that VCI technologies
are reliable alternatives to more expensive and less effective traditional systems. As VCI solutions become a
worldwide accepted standard, we expect our Oil & Gas sales to increase significantly.

Natur-Tec® Bioplastics
The COVID-19 pandemic has had a heavy impact on our Natur-Tec® business, as the crisis has affected many
high-volume users of compostable products including college campuses, stadiums, arenas, restaurants, and
cafeterias in large corporate office complexes. These are expected to be some of the last businesses to reopen
from the pandemic, and many of these institutions have still not announced their reopening plans. Furthermore,
production across the apparel industry has declined sharply, thereby also decreasing demand for the Natur-Tec®
bioplastic bags many famous clothing brands ship their product in as part of the sustainability initiatives within
this industry. As a result, Natur-Tec® sales declined 25.1% to $13,164,000 for fiscal 2020, and third and fourth
quarter sales were down 50.4% and 58.5%, respectively, compared to the same periods last fiscal year.

Over the near-term, we expect market conditions for our bioplastics solutions will remain soft. However, as
the world recovers from the COVID-19 pandemic, we believe the bioplastics market will rebound in the coming
quarters and long-term trends within this market are extremely encouraging. In addition, throughout fiscal 2020,

Natur-Tec® gained meaningful traction in the China market and saw an increasing number of new customers
globally. In fact, during the second quarter of fiscal 2020, we began supplying our proprietary resin compounds
to one of the world’s largest manufacturers of cutlery within the food service industry. We also expect the
pandemic may also push broader implementation, as hygiene considerations for food service applications
support increased demand for our compostable products. We also believe societal and political trends globally
continue to support growing demand for alternatives to single use plastics, and Natur-Tec® is extremely well
positioned to benefit from these positive secular trends.

Closing
While the timing and pace of the economic recovery remains uncertain, especially while the COVID-19 pandemic
is not fully under control, I am encouraged by the direction we are headed, as well as, NTIC’s compelling position
within large, growing, and global markets. I am proud of how NTIC and our joint venture partners have responded
throughout this challenging period and excited by the new business opportunities we continue to uncover. I want
to thank all the members of NTIC’s global family of employees, joint venture partners, friends and colleagues for
their hard work and dedication during fiscal 2020.

As we start fiscal 2021, I am excited by the potential NTIC has to continue to create long-term value for
stockholders with profitable sales growth throughout our ZERUST® industrial, ZERUST® Oil & Gas, and Natur-
Tec® product categories.

Sincerely,

G. Patrick Lynch
President & CEO, NTIC

G. Patrick Lynch

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NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

January 15, 2021

The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware
corporation, will be held at NTIC’s corporate executive offices located at 4201 Woodland Road, Circle
Pines, Minnesota 55014, beginning at 11:00 a.m., Central Standard Time, on Friday, January 15, 2021, for
the following purposes:

1. To elect eight persons to serve as directors until our next annual meeting of stockholders or until

their respective successors are elected and qualified.

2. To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in

the accompanying proxy statement.

3. To ratify the selection of Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause,
LLP) as our independent registered public accounting firm for the fiscal year ending August 31,
2021.

4. To approve the Northern Technologies International Corporation Amended and Restated 2019 Stock

Incentive Plan.

5. To transact such other business as may properly come before the meeting or any adjournment of the

meeting.

All of us have been impacted by the COVID-19 pandemic in our personal, business and community lives.
The same is true for NTIC. We continue to serve our customers but need to help reduce the spread of
COVID-19. In light of the serious nature and health risks from the spreading of COVID-19 in public
gatherings, we are taking the very unusual step of asking that you seriously consider not attending the
Annual Meeting. In light of the governmental restrictions on the number of people that can attend
gatherings, our Annual Meeting will be significantly different than in past years. Please note the following:

(cid:120) We plan to impose social distancing and other safety protocols in accordance with federal, state and

local guidance.

(cid:120) We will not be serving refreshments in connection with the Annual Meeting.

(cid:120) We do not intend to have a presentation concerning the results from our fiscal 2020 and the outlook

for fiscal 2021.

(cid:120) We expect that the official business meeting will last no more than 15 minutes, subject to questions.

As part of our precautions regarding COVID-19, we are planning for the possibility that the Annual Meeting
may be held at a different venue or solely by means of virtual communication. If we take this step, we will
publicly announce the decision to do so in advance, and details on how to participate will be posted on our
website at ir.ntic.com/investor-relations and filed with the Securities and Exchange Commission as
additional proxy materials.

Only those stockholders of record at the close of business on November 18, 2020 will be entitled to notice of,
and to vote at, the meeting and any adjournments thereof. A stockholder list will be available at our
corporate offices beginning January 5, 2021 during normal business hours for examination by any
stockholder registered on NTIC’s stock ledger as of the record date, November 18, 2020, for any purpose
germane to the Annual Meeting.

We are pleased again this year to use the “Notice and Access” method of providing proxy materials to our
stockholders via the Internet. We believe that this process expedites your receipt of our proxy materials,
lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting.

By Order of the Board of Directors,

Matthew C. Wolsfeld
Corporate Secretary

November 30, 2020
Circle Pines, Minnesota

Important: Whether or not you expect to attend the meeting in person, please vote by the Internet or
telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be
voted. A prompt response is helpful and your cooperation is appreciated.

TABLE OF CONTENTS

Page

INTERNET AVAILABILITY OF PROXY MATERIALS ......................................................................... ii
PROXY STATEMENT SUMMARY ........................................................................................................... 1
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ................................. 8
Date, Time, Place and Purposes of Meeting ............................................................................................. 8
Who Can Vote .......................................................................................................................................... 8
How You Can Vote .................................................................................................................................. 9
How Does the Board Recommend that You Vote .................................................................................. 10
How You May Change Your Vote or Revoke Your Proxy .................................................................... 10
Quorum Requirement ............................................................................................................................. 10
Vote Required ......................................................................................................................................... 10
Other Business ........................................................................................................................................ 12
Procedures at the Annual Meeting .......................................................................................................... 12
Householding of Annual Meeting Materials .......................................................................................... 12
Proxy Solicitation Costs ......................................................................................................................... 13
PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................................. 14
Number of Directors ............................................................................................................................... 14
Nominees for Director ............................................................................................................................ 14
Information about Current Directors and Board Nominees .................................................................... 14
Additional Information about Current Directors and Board Nominees.................................................. 15
Board Recommendation ......................................................................................................................... 18
PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION ................................... 19
Introduction ............................................................................................................................................ 19
Board Recommendation ......................................................................................................................... 20

PROPOSAL THREE—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM ............................................................................................................ 21
Selection of Independent Registered Public Accounting Firm ............................................................... 21
Audit, Audit-Related, Tax and Other Fees ............................................................................................. 21
Audit Committee Pre-Approval Policies and Procedures....................................................................... 22
Board Recommendation ......................................................................................................................... 22

PROPOSAL FOUR—APPROVAL OF THE NORTHERN TECHNOLOGIES

INTERNATIONAL CORPORATION AMENDED AND RESTATED 2019 STOCK
INCENTIVE PLAN ............................................................................................................................... 23
Background and Proposed Amendments ................................................................................................ 23
Summary of Sound Governance Features of the Amended 2019 Plan ................................................... 24
Background for Shares Authorized for Issuance .................................................................................... 24
New Plan Benefits .................................................................................................................................. 38
Board Recommendation ......................................................................................................................... 38
STOCK OWNERSHIP ............................................................................................................................... 39
Beneficial Ownership of Significant Stockholders and Management .................................................... 39
Securities Authorized for Issuance Under Equity Compensation Plans ................................................. 41
CORPORATE GOVERNANCE ................................................................................................................ 42
Corporate Governance Guidelines .......................................................................................................... 42
Board Leadership Structure .................................................................................................................... 42
Director Independence ............................................................................................................................ 43
Board Meetings and Attendance ............................................................................................................. 43
Board Committees .................................................................................................................................. 43
Audit Committee .................................................................................................................................... 43

Compensation Committee ...................................................................................................................... 45
Nominating and Corporate Governance Committee .............................................................................. 47
Director Nominations Process ................................................................................................................ 48
Board Oversight of Risk ......................................................................................................................... 49
Code of Ethics ........................................................................................................................................ 50
Policy Regarding Director Attendance at Annual Meetings of Stockholders ........................................ 50
Complaint Procedures ............................................................................................................................. 50
Process Regarding Stockholder Communications with Board of Directors ........................................... 51
DIRECTOR COMPENSATION ................................................................................................................ 52
Summary of Cash and Other Compensation .......................................................................................... 52
Non-Employee Director Compensation Program ................................................................................... 53
Consulting Agreement ............................................................................................................................ 55
EXECUTIVE COMPENSATION .............................................................................................................. 56
Compensation Review ............................................................................................................................ 56
Summary of Cash and Other Compensation .......................................................................................... 65
Outstanding Equity Awards at Fiscal Year End ..................................................................................... 66
Stock Incentive Plans .............................................................................................................................. 67
Post-Termination Severance and Change in Control Arrangements ...................................................... 69
Compensation Committee Interlocks and Insider Participation ............................................................. 71
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 72
Introduction ............................................................................................................................................ 72
Procedures Regarding Approval of Related Party Transactions ............................................................ 72
Description of Related Party Transactions ............................................................................................. 73

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2022 ANNUAL

MEETING OF STOCKHOLDERS ........................................................................................................ 74
Stockholder Proposals for 2022 Annual Meeting ................................................................................... 74
Director Nominations for 2022 Annual Meeting .................................................................................... 74
COPIES OF FISCAL 2020 ANNUAL REPORT ....................................................................................... 75
________________

INTERNET AVAILABILITY OF PROXY MATERIALS
________________

Instead of mailing a printed copy of our proxy materials, including our Annual Report to Stockholders, to
each stockholder of record, we have provided access to these materials in a fast and efficient manner via
the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the costs
of our Annual Meeting and reduces the environmental impact of our meeting. On or about November 30,
2020, we expect to begin mailing a Notice of Internet Availability of Proxy Materials to stockholders of
record as of November 18, 2020 and post our proxy materials on the website referenced in the Notice of
Internet Availability of Proxy Materials (www.proxyvote.com). As more fully described in the Notice of
Internet Availability of Proxy Materials, stockholders may choose to access our proxy materials at
www.proxyvote.com or may request proxy materials in printed or electronic form. In addition, the Notice
of Internet Availability of Proxy Materials and website provide information regarding how you may
request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
For those who previously requested printed proxy materials or electronic materials on an ongoing basis,
you will receive those materials as you requested.

PROXY STATEMENT SUMMARY
________________

This executive summary provides an overview of the information included in this proxy statement. We
recommend that you review the entire proxy statement and our 2020 Annual Report to Stockholders
before voting.

2021 ANNUAL MEETING OF STOCKHOLDERS

DATE AND TIME

Friday, January 15, 2021
11:00 a.m. (Central Time)

LOCATION

4201 Woodland Road
Circle Pines, MN 55014

Due to the COVID-19
pandemic, the Annual Meeting
may be held at a different
venue or solely by means of
virtual communication.

Proposal

Proposal No. 1: Election of
directors

Proposal No. 2: Advisory vote on
executive compensation

Proposal No. 3: Ratification of
appointment of independent
registered public accounting firm

Proposal No. 4: Approval of
Northern Technologies
International Corporation Amended
and Restated 2019 Stock Incentive
Plan

Board’s Vote
Recommendation

Page

FOR

RECORD DATE

November 18, 2020

Holders of record of our common stock at the close of business on
November 18, 2020 are entitled to notice of, to attend, and to vote at
the 2021 Annual Meeting of Stockholders or any continuation,
postponement, or adjournment thereof.

On or about November 30, 2020, we expect to begin mailing a Notice of Internet Availability of Proxy
Materials to stockholders of record as of November 18, 2020 and post our proxy materials on the website
referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com).

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 15, 2021

This proxy statement and our 2020 Annual Report to Stockholders are available on the Internet, free of
charge, at www.proxyvote.com. On this website, you will be able to access this proxy statement, our 2020
Annual Report, and any amendments or supplements to these materials that are required to be furnished to
stockholders. We encourage you to access and review all of the important information contained in the
proxy materials before voting.

FISCAL 2020 BUSINESS HIGHLIGHTS

Below are highlights of our financial, operational and strategic achievements during fiscal 2020.

Financial

Net Sales

Research and Development

Quarterly Cash Dividends

Operational

19 Joint Ventures

Although our consolidated net sales decreased 14.5% during fiscal
2020 compared to fiscal 2019 due to the impact of the COVID-19
pandemic, sales of ZERUST® products and services into the oil and
gas industry increased by 2.0%, due in part to our sales and marketing
efforts targeting this industry.

We increased research and development spending by 4.1% in fiscal
2020 in order to increase personnel and development efforts, which
will allow us to continue growing and adapting our product offerings.

Though payment of quarterly cash dividends has been temporarily
suspended due to the current COVID-19 pandemic, we paid a
quarterly cash dividend of $0.065 per share during the first and second
quarters of fiscal 2020, an increase of 8.3% over the dividends paid
during the first and second quarters of fiscal 2019.

Our 19 joint ventures provide us with access to global markets with an
annual global market potential estimated at $500 million.

9 Operating Subsidiaries

We maintain nine wholly or majority-owned operating subsidiaries in
North America, South America, Europe and Asia.

Over 60 Countries

Strategic

Industrial Manufacturing
Industry

Oil and Gas Industry

Bioplastics Industry

Our network of joint ventures and subsidiaries allows us to operate in
over 60 countries worldwide, allowing us reach customers globally.

ZERUST® rust and corrosion inhibiting packaging solutions resolve
corrosion problems while reducing operating costs, increasing
productivity and enhancing customer satisfaction. During fiscal 2020,
ZERUST® industrial sales were negatively impacted as a result of the
COVID-19 pandemic.

Our global network of trained corrosion management professionals
and channel partners help us develop specialized corrosion mitigation
solutions for the oil and gas industry, provide local support and
conduct client training. During fiscal 2020, we continued to add new
customers despite the negative impact of the COVID-19 pandemic on
the oil and gas industry.

Our Natur-Tec® biobased and compostable plastics are manufactured
using NTIC’s patented and/or proprietary technologies and are
intended to replace conventional plastics and thereby reduce our
customers’ carbon footprint and provide environmentally sound waste
disposal options. During fiscal 2020, we adapted our Natur-Tec®
product offerings in order to respond to needs created by the COVID-
19 pandemic.

CORPORATE GOVERNANCE HIGHLIGHTS

(cid:57) Annual election of directors
(cid:57) Majority of independent directors
(cid:57) Independent Board Chairman
(cid:57) Three fully independent Board committees
(cid:57) Corporate governance guidelines
(cid:57) Annual review of governance documents

(cid:57) Recent Board refreshment efforts
(cid:57) 100% Board meeting attendance by directors
(cid:57) No poison pill
(cid:57) Annual say-on-pay vote
(cid:57) Robust clawback policy
(cid:57) No guaranteed bonuses or significant perks

BOARD OF DIRECTORS COMPOSITION AND DIVERSITY

The Board of Directors understands the importance of adding diverse, experienced talent to the Board of
Directors in order to establish an array of experience and strategic views. The Nominating and Corporate
Governance Committee is committed to refreshment efforts to ensure that the composition of the Board of
Directors and each of its committees encompasses a wide range of perspectives and knowledge.

All of our Board nominees collectively bring tremendous diversity to the Board. Each nominee is a
strategic thinker and has varying, specialized experience in the areas relevant to NTIC and its businesses.
Moreover, their collective experience covers a wide range of geographies and industries, and roles in
academia, corporate governance and government. The eight director nominees range in age from 53 to
72; two of the eight director nominees are women; three are of Asian descent; one is a citizen of
Singapore; one is a citizen of the Republic of Korea and one is a citizen of Germany.

BOARD OF DIRECTORS NOMINEES

Below are the directors nominated for election by stockholders at the 2021 Annual Meeting of
Stockholders for a one-year term. All director nominees listed below served during the fiscal year ended
August 31, 2020. Additionally, all director nominees listed below attended 100% of all Board meetings
and 100% of the sum of all meetings of the Board of Directors and its committees, as applicable.

Director
Nancy E. Calderon
Sarah E. Kemp
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen

Age
61
54
69
68
53
71
72
53

Serving Since
2019
2019
2008
2004
2004
2004
2010
2012

Independent
Yes
Yes
Yes
Yes
No
No
Yes
Yes

The Board of Directors recommends a vote “FOR” each of these nominees.

COMMITTEE COMPOSITION

The Board of Directors maintains a standing Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee. Below are our current directors and their Board
committee memberships.

Director

Nancy E. Calderon
Sarah E. Kemp
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen

KEY QUALIFICATIONS

Audit
Committee
●

Compensation
Committee

Nominating and Corporate
Governance Committee

●

●
●

●

The following are some key qualifications, skills and experiences of our Board of Directors.

(cid:120) Leadership/Management
(cid:120) Prior Board Experience

(cid:120) Financial Expertise
(cid:120) Government Expertise

(cid:120)
International Experience
(cid:120) Bioplastics Industry Expertise

EXECUTIVE COMPENSATION PHILOSOPHY

Our guiding compensation philosophy is to maintain an executive compensation program that allows us
to attract, retain, motivate and reward qualified and talented executives who will enable us to grow our
business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.

The following core principles provide a framework for our executive compensation program:

(cid:120) Align interests of our executives with stockholder interests;

(cid:120)

Integrate compensation with our business plans and strategic goals;

(cid:120) Link amount of compensation to both company and individual performance; and

(cid:120) Provide fair and competitive compensation opportunities that attract and retain executives.

EXECUTIVE COMPENSATION BEST PRACTICES

Our compensation practices include many best practices that support our executive compensation
objectives and principles and benefit our stockholders.

What we do:
(cid:120) Emphasize pay for performance
(cid:120) Structure our executive compensation so a

significant portion of pay is at risk

What we don’t do:
(cid:120) No guaranteed salary increases or bonuses
(cid:120) No repricing of stock options unless approved

by stockholders

(cid:120) Structure our executive compensation so a

(cid:120) No pledging of NTIC securities, unless certain

significant portion is paid in equity
(cid:120) Maintain competitive pay packages
(cid:120) Maintain robust clawback policy
(cid:120) Hold an annual say-on-pay vote

criteria are met

(cid:120) No hedging of NTIC securities
(cid:120) No excessive perquisites
(cid:120) No tax gross-ups

HOW WE PAY

Our executive compensation program consists of the following principal elements:

(cid:120) Base salary – a fixed amount, paid in cash and reviewed annually and, if appropriate, adjusted.

(cid:120) Annual incentive – a variable, short-term element that is typically payable in cash and is based on a

corporate profitability goal and individual performance goals.

(cid:120) Long-term incentive – a variable, long-term element that is provided in stock options.

2020 EXECUTIVE COMPENSATION ACTIONS

2020 compensation actions and incentive plan outcomes based on performance are summarized below:

Element

Key Fiscal 2020 Actions

Base Salary

Our executives received 1.5% increases over their 2019 base salaries.

Annual Incentive

Long-Term Incentive

Our executives received annual bonuses based primarily on Adjusted
EBITOI (earnings before interest, taxes, and other income, as adjusted to
take into account amounts paid under bonus plan and other adjustments), in
amounts representing 11% of their base salaries. A portion of the annual
incentive earned for fiscal 2020 was paid in the form of stock option grants
made at the beginning of fiscal 2020.

Our executives received stock option grants on September 1, 2019, which
vested in full on September 1, 2020. A portion of the fiscal 2020 stock
option grant was intended as partial payout of the fiscal 2020 annual bonus
program.

Going forward, our executive stock options will vest annually over a three-
year period.

Health and Welfare Benefits No significant changes were made.

Retirement Plans

No significant changes were made.

Perquisites

No significant changes were made.

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Board of Directors is providing our stockholders with an advisory vote on our executive
compensation, commonly known as a “say-on-pay” vote. We last submitted a say-on-pay proposal to our
shareholders at our 2020 Annual Meeting of Stockholders held on January 17, 2020. At that meeting,
over 99% of the votes cast by our stockholders were in favor of our say-on-pay vote.

The Board of Directors recommends a vote “FOR” the approval of our say-on-pay proposal.

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Although stockholder ratification is not required, the appointment of Baker Tilly US, LLP (formerly
known as Baker Tilly Virchow Krause, LLP) as NTIC’s independent registered public accounting firm
for fiscal 2021 is being submitted for ratification at the 2020 Annual Meeting of Stockholders as a matter
of good corporate governance.

The Board of Directors recommends a vote “FOR” the ratification of Baker Tilly US, LLP as NTIC’s
independent registered public accounting firm.

APPROVAL OF NTIC AMENDED AND RESTATED 2019 STOCK INCENTIVE PLAN

The Board has approved, subject to approval by our stockholders, the Northern Technologies
International Corporation Amended and Restated 2019 Stock Incentive Plan incorporating certain
amendments, including an increase in the number of shares of our common stock available for issuance
under the plan by an additional 800,000 shares and a new limit on overall non-employee director
compensation of $200,000 per year or $250,000 in the case of a non-employee chairman, lead

independent director, or non-employee director in the first year of service on the Board of Directors. This
proposed limit on non-employee director compensation will be in lieu of the currently existing limit on
the number of shares subject to awards granted to a non-employee director each year. Our continuing
ability to offer equity incentive awards under our equity plan is critical to our ability to attract and retain
qualified individuals to perform services, provide incentive compensation for such individuals in a form
that is linked to the growth and profitability of NTIC and increases in stockholder value, and provide
opportunities for equity participation that align the interests of recipients with those of our stockholders.

The Board of Directors recommends a vote “FOR” the approval of the Northern Technologies
International Corporation Amended and Restated 2019 Stock Incentive Plan.

2022 ANNUAL MEETING OF STOCKHOLDERS

We anticipate that our 2022 Annual Meeting of Stockholders will be held on or about Friday, January 14,
2022.

The following are important dates in connection with our 2022 Annual Meeting of Stockholders.

Stockholder Action
Proposal Pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended
Nomination of a Candidate Pursuant to our Bylaws

Proposal of Other Business for Consideration
Pursuant to our Bylaws

Submission Deadline
No later than August 2, 2021

Between September 17, 2021 and
October 17, 2021
Between September 17, 2021 and
October 17, 2021

4201 Woodland Road, Circle Pines, Minnesota 55014

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
January 15, 2021

The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for
use at the 2021 Annual Meeting of Stockholders to be held on Friday, January 15, 2021. The Board of
Directors expects to make available to our stockholders beginning on or about November 30, 2020 the
Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or
will mail these materials to stockholders of NTIC upon their request.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
________________

Date, Time, Place and Purposes of Meeting

The Annual Meeting of Stockholders of Northern Technologies International Corporation (sometimes
referred to as “NTIC,” “we,” “our” or “us” in this proxy statement) will be held on Friday, January 15,
2021, at 11:00 a.m., Central Standard Time, at the principal executive offices of Northern Technologies
International Corporation located at 4201 Woodland Road, Circle Pines, Minnesota 55014, for the
purposes set forth in the Notice of Annual Meeting of Stockholders.

As part of our precautions regarding the COVID-19 pandemic, we are planning for the possibility that the
Annual Meeting may be held at a different venue or solely by means of virtual communication. If we
take this step, we will publicly announce the decision to do so in advance, and details on how to
participate will be posted on our website at ir.ntic.com/investor-relations and filed with the Securities and
Exchange Commission as additional proxy materials. If we hold the Annual Meeting in person, we plan
to impose social distancing and other safety protocols in accordance with federal, state and local
guidance. However, we strongly encourage all stockholders, for their own well-being and to reduce the
risk of aiding the spread of COVID-19, to vote their shares prior to the Annual Meeting and to not attend
the Annual Meeting in person. Further details on how to vote by Internet, by telephone, or by mail are set
forth in this proxy statement.

Who Can Vote

Stockholders of record at the close of business on November 18, 2020 will be entitled to notice of and to
vote at the meeting or any adjournment of the meeting. As of that date, there were 9,104,636 shares of
our common stock outstanding. Each share of our common stock is entitled to one vote on each matter to
be voted on at the Annual Meeting. Stockholders are not entitled to cumulate voting rights.

How You Can Vote

Your vote is important. Whether you hold shares directly as a stockholder of record or beneficially in
“street name” (through a broker, bank or other nominee), you may vote your shares without attending the
Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting
voting instructions to your broker, bank or other nominee.

If you are a registered stockholder whose shares are registered in your name, you may vote your shares in
person at the meeting or by one of the three following methods:

(cid:120) Vote by Internet, by going to the website address www.proxyvote.com and following the
instructions for Internet voting shown on the Notice of Internet Availability of Proxy
Materials or on your proxy card.

(cid:120) Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone
voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

(cid:120) Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in

the envelope provided if you received a paper copy of these proxy materials.

If you vote by Internet or telephone, please do not mail your proxy card.

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a
separate voting instruction form with this proxy statement or you may need to contact your broker, bank
or other nominee to determine whether you will be able to vote electronically using the Internet or
telephone.

The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Standard Time
(10:59 p.m., Central Standard Time), on the day before the date of the Annual Meeting or any
adjournments thereof. Please see the Notice of Internet Availability of Proxy Materials, your proxy card
or the information your bank, broker, or other holder of record provided to you for more information on
your options for voting.

If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the
named proxies will vote your shares as you direct. You have three choices on each matter to be voted on.

For Proposal One—Election of Directors, you may:

(cid:120) Vote FOR all eight nominees for director,

(cid:120) WITHHOLD your vote from all eight nominees for director or

(cid:120) WITHHOLD your vote from one or more of the eight nominees for director.

For each of the other proposals, you may:

(cid:120) Vote FOR the proposal,

(cid:120) Vote AGAINST the proposal or

(cid:120) ABSTAIN from voting on the proposal.

If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to
vote your shares, the proxies will vote your shares FOR all eight of the nominees for election to the
Board of Directors in Proposal One—Election of Directors and FOR each of the other proposals.

How Does the Board Recommend that You Vote

The Board of Directors unanimously recommends that you vote:

(cid:120) FOR all eight of the nominees for election to the Board of Directors in Proposal One—

Election of Directors;

(cid:120) FOR Proposal Two—Advisory Vote on Executive Compensation;

(cid:120) FOR Proposal Three—Ratification of Selection of Independent Registered Public

Accounting Firm; and

(cid:120) FOR Proposal Four—Approval of the Northern Technologies International Corporation

Amended and Restated 2019 Stock Incentive Plan.

How You May Change Your Vote or Revoke Your Proxy

If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time
before it is voted by one of the following methods:

(cid:120) Submitting another proper proxy with a more recent date than that of the proxy first given by
following the Internet or telephone voting instructions or completing, signing, dating and
returning a proxy card to us;

(cid:120) Sending written notice of your revocation to our Corporate Secretary; or

(cid:120) Attending the Annual Meeting and voting by ballot.

Quorum Requirement

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority (4,552,182
shares) of the outstanding shares of our common stock as of the record date will constitute a quorum for
the transaction of business at the Annual Meeting. In general, shares of our common stock represented by
proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum
is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A
“broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not
voted on a particular matter because voting instructions have not been received by the broker from the
customer, and the broker has no discretionary authority to vote on behalf of such customer on such
matter.

Vote Required

Proposal One—Election of Directors will be decided by the affirmative vote of a plurality of shares of our
common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. A
“plurality” for Proposal One means the individuals who receive the greatest number of votes cast “For”
are elected as directors. However, under our Corporate Governance Guidelines, in an uncontested
election of directors, any nominee for director who receives a greater number of votes “withheld” from

his or her election than votes “for” his or her election by stockholders present in person or by proxy at the
Annual Meeting and entitled to vote in the election of directors is required to tender a written offer to
resign from the Board of Directors within five business days of the certification of the stockholder vote by
the Inspector of Elections.

Proposal Two—Advisory Vote on Executive Compensation will be decided by the affirmative vote of a
majority of shares of our common stock present in person or represented by proxy and entitled to vote at
the Annual Meeting. Although this is a non-binding, advisory vote, the Compensation Committee and
Board of Directors expect to take into account the outcome of the vote when considering future executive
compensation decisions.

Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm will be
decided by the affirmative vote of a majority of shares of our common stock present in person or
represented by proxy and entitled to vote at the Annual Meeting.

Proposal Four—Approval of the Northern Technologies International Corporation Amended and Restated
2019 Stock Incentive Plan will be decided by the affirmative vote of votes cast on the proposal and the
affirmative vote of a majority of shares of our common stock present in person or represented by proxy
and entitled to vote at the Annual Meeting.

If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is
permitted to exercise its discretion to vote your shares only on certain “routine” matters. Proposal One—
Election of Directors, Proposal Two—Advisory Vote on Executive Compensation and Proposal Four—
Approval of the Northern Technologies International Corporation Amended and Restated 2019 Stock
Incentive Plan are not “routine” matters. Accordingly, if you do not direct your broker how to vote, your
broker may not exercise discretion and may not vote your shares on any of these three proposals. This is
called a “broker non-vote,” and although your shares will be considered to be represented by proxy at the
meeting, they will not be considered to be shares “entitled to vote” or “votes cast” at the meeting and will
not be counted as having been voted on the applicable proposal. Proposal Three—Ratification of
Selection of Independent Registered Public Accounting Firm is a “routine” matter, and, as such, your
broker is permitted to exercise its discretion to vote your shares for or against the proposals in the absence
of your instruction.

Proposal
Proposal One: Election of
Directors

Votes Required

Plurality of the votes cast. This
means that the eight nominees
receiving the highest number of
affirmative “FOR” votes will be
elected as directors.(1)

Proposal Two: Advisory Vote
on Executive Compensation

Affirmative vote of a majority of
shares of common stock present
in person or by proxy and entitled
to vote thereon.

Effect of Votes
Withheld /
Abstentions
Votes withheld
will have no
effect, unless
there are more
votes withheld
than “FOR”
votes.(1)
Abstentions will
have the effect
of a vote against
the proposal.

Effect of
Broker
Non-Votes
Broker non-
votes will have
no effect.

Broker non-
votes will have
no effect.

Proposal
Proposal Three: Ratification
of Appointment of
Independent Registered Public
Accounting Firm

Votes Required
Affirmative vote of a majority of
shares of common stock present
in person or by proxy and entitled
to vote thereon.

Proposal Four: Approval of
the Northern Technologies
International Corporation
Amended and Restated 2019
Stock Incentive Plan

________________________

Affirmative vote of votes cast on
the proposal and affirmative vote
of a majority of shares of
common stock present in person
or by proxy and entitled to vote
thereon.

Effect of Votes
Withheld /
Abstentions
Abstentions will
have the effect
of a vote against
the proposal.

Abstentions will
have the effect
of a vote against
the proposal.

Effect of
Broker
Non-Votes

We do not
expect any
broker non-
votes on this
proposal.
Broker non-
votes will have
no effect.

(1)

Under our Corporate Governance Guidelines, in an uncontested election of directors, any
nominee for director who receives a greater number of votes “withheld” from his or her election
than votes “for” his or her election by stockholders present in person or by proxy at the Annual
Meeting and entitled to vote in the election of directors is required to tender a written offer to
resign from the Board of Directors within five business days of the certification of the
stockholder vote by the Inspector of Elections.

Other Business

Our management does not intend to present other items of business and knows of no items of business
that are likely to be brought before the Annual Meeting, except those described in this proxy statement.
However, if any other matters should properly come before the Annual Meeting, the persons named on
the proxy card will have discretionary authority to vote such proxy in accordance with their best judgment
on the matters.

Procedures at the Annual Meeting

The presiding officer at the Annual Meeting will determine how business at the meeting will be
conducted. Only matters brought before the Annual Meeting in accordance with our Bylaws will be
considered. Only a natural person present at the Annual Meeting who is either one of our stockholders, or
is acting on behalf of one of our stockholders, may make a motion or second a motion. A person acting
on behalf of a stockholder must present a written statement executed by the stockholder or the duly-
authorized representative of the stockholder on whose behalf the person purports to act.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in the practice of
“householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy
Materials. This means that only one copy of this proxy statement, our Annual Report to Stockholders or
the Notice of Internet Availability of Proxy Materials may have been sent to multiple stockholders in each
household, unless contrary instructions have been given. We will promptly deliver a separate copy of any
of these documents to any stockholder upon written or oral request to our Stockholder Information
Department, Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines,
Minnesota 55014, telephone: (763) 225-6637. Any stockholder who wants to receive separate copies of
this proxy statement, our Annual Report to Stockholders or the Notice of Internet Availability of Proxy
Materials in the future, or any stockholder who is receiving multiple copies and would like to receive only

one copy per household, should contact the stockholder’s bank, broker or other nominee record holder, or
the stockholder may contact us at the above address and telephone number.

Proxy Solicitation Costs

The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of
proxies and soliciting material, as well as the cost of making available or forwarding this material to the
beneficial owners of our common stock, will be borne by NTIC. Our directors, officers and regular
employees may, without compensation other than their regular compensation, solicit proxies by
telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for
expenses in making available or forwarding solicitation materials to the beneficial owners of our common
stock.

PROPOSAL ONE—ELECTION OF DIRECTORS
________________

Number of Directors

Our Bylaws provide that the Board of Directors will consist of at least one member or such other number
as may be determined by the Board of Directors from time to time or by the stockholders at an annual
meeting. The Board of Directors has fixed the number of directors at eight.

Nominees for Director

The Board of Directors has nominated the following eight individuals to serve as our directors until the
next annual meeting of stockholders or until their successors are elected and qualified. All of the
nominees named below are current members of the Board of Directors.

(cid:120) Nancy E. Calderon
(cid:120) Sarah E. Kemp
(cid:120) Soo-Keong Koh
(cid:120) Sunggyu Lee, Ph.D.

(cid:120) G. Patrick Lynch
(cid:120) Ramani Narayan, Ph.D.
(cid:120) Richard J. Nigon
(cid:120) Konstantin von Falkenhausen

Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is
eight.

If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to
serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for
a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may
be voted for that fewer number of nominees as results from the inability of any nominee to serve. The
Board of Directors has no reason to believe that any of the nominees will be unable to serve.

Information about Current Directors and Board Nominees

The following table sets forth as of November 18, 2020 the name, age and principal occupation of each
current director and each individual who has been nominated by the Board of Directors to serve as a
director of NTIC, as well as how long each individual has served as a director of NTIC.

Name
Nancy E. Calderon(1)
Sarah E. Kemp(2)
Soo-Keong Koh(2)
Sunggyu Lee, Ph.D.(3)
G. Patrick Lynch
Ramani Narayan, Ph.D.

Age Principal Occupation
61
Former Partner of KPMG LLP
54 Associate Vice President of Merck
69 Managing Director of EcoSave Pte Ltd.
68 Chief Technologist of Chemtech Innovators LLC
53
President and Chief Executive Officer of NTIC
71 Distinguished Professor in Department of Chemical
Engineering & Materials Science at Michigan State
University
Senior Vice President of Cedar Point Capital, Inc.
Partner of B Capital Partners AG

72
53

Director
Since
2019
2019
2008
2004
2004
2004

2010
2012

Richard J. Nigon(1)(2)(3)
Konstantin von Falkenhausen(1)(3)
_________________________
(1)
(2)
(3)

Member of the Audit Committee
Member of the Nominating and Corporate Governance Committee
Member of the Compensation Committee

Additional Information about Current Directors and Board Nominees

The following paragraphs provide information about each current director and nominee for director,
including all positions he or she holds, his or her principal occupation and business experience for the past
five years, and the names of other publicly-held companies of which the director or nominee currently
serves as a director or has served as a director during the past five years. We believe that all of our
directors and nominees display personal and professional integrity; satisfactory levels of education and/or
business experience; broad-based business acumen; an appropriate level of understanding of our business
and its industry and other industries relevant to our business; the ability and willingness to devote
adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with
those of our other directors that helps build a board that is effective, collegial and responsive to the needs
of NTIC; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and
background; and the ability to represent the interests of all of our stockholders. The information
presented below regarding each director and nominee also sets forth specific experience, qualifications,
attributes and skills that led the Board of Directors to the conclusion that such individual should serve as a
director in light of our business and structure.

Nancy E. Calderon has been a director of NTIC since October 2019. Ms. Calderon is a CPA and retired
from KPMG LLP in September 2019 after a distinguished 33-year career. Until her retirement, Nancy
served as Global Lead Partner for a Fortune 40 Technology company, managing a global team of over
500 professionals in more than 50 countries, a position she held since July 2012, senior partner of
KPMG’s Board Leadership Center from its inception in 2015, and as a director of KPMG’s Global
Delivery Center in India and its related holding companies since September 2011. Previously, she was
KPMG’s Americas Chief Administrative Officer and U.S. National Partner in Charge, Operations from
July 2008 to June 2012. Ms. Calderon has sat on a number of KPMG committees, including the
Americas Region Management Committee, Enterprise Risk Management, Privacy, Pension Steering and
Investment, Social Media and Knowledge Management. She currently serves on the boards of directors
of Arcimoto, Inc. and Belden Inc. We believe Ms. Calderon’s qualifications to sit on the Board of
Directors include her extensive financial accounting experience with KPMG and her current and prior
experience on boards of directors, including, in particular, her experience serving on the audit committees
of Arcimoto, Inc.; Belden, Inc.; KPMG’s Global Delivery Center; Women Corporate Directors
Foundation and the New York YMCA. Ms. Calderon received a Bachelor of Science from UC
Berkeley’s Haas Business School and a Master of Science from Golden Gate University.

Sarah E. Kemp has been a director of NTIC since October 2019. Ms. Kemp is Associate Vice President,
for Merck, a global biopharmaceutical company. Ms. Kemp joined Merck’s Policy Communication and
Population Health organization in July 2019 and is responsible for supporting the international teams in
their strategic policy shaping initiatives, defining and leading global above-country engagement and
directing policy initiatives in support of the entire ex-US market set. Prior to this role, she was the
Executive Director, Public Policy and Commercial Strategies for China and the Asia Pacific. Before
joining Merck, Ms. Kemp was the Deputy Under Secretary, for the International Trade Administration at
the U.S. Department of Commerce in Washington, D.C. In this role, she oversaw a $485 million annual
budget and 2,100 trade and investment professionals based in 108 US cites and 76 markets around the
world. Prior to her time in D.C., she was the Minister Counselor for Commercial Affairs at the U.S.
Embassy in Beijing, overseeing the U.S. Department of Commerce’s trade promotion and trade policy
activities in its operations in Beijing, Chengdu, Shanghai, Wuhan, Shenyang and Guangzhou. In this
capacity, she was a key advisor to the Ambassador and advised U.S. CEOs—from fortune 500 companies
to SME’s –on China business strategy, market access, export promotion, anti-dumping / countervailing
duty cases, intellectual property protection and export controls. As a career Foreign Commercial Service
Officer, she served as the Country Manager in China and Vietnam, and had multiple postings in Beijing,
Hong Kong and Bangkok. Ms. Kemp joined Commerce as a Presidential Management Fellow.

Ms. Kemp served on the board of directors of the Concordia International School in Hanoi, Vietnam, an
international day school offering preschool through high school education, from 2012-2014 and was the
Co-Chair of Women Corporate Directors in Vietnam from 2011—2014 and in Beijing from 2009-2011.
Ms. Kemp is currently a member of the World Economic Forum’s Global Future Council on China. We
believe Ms. Kemp’s qualifications to sit on the Board of Directors include her extensive knowledge and
experience in international commerce, particularly with regard to Asia Pacific and Greater China, her
prior board experience and her in depth experience in international and public affairs. Ms. Kemp received
her Master of Business Administration from the Chinese University of Hong Kong, her Master of Public
Administration from Columbia University and her Bachelor of Arts in Physiological–Anthropology from
Hamilton College.

Soo-Keong Koh has been a director of NTIC since May 2008. Mr. Koh is the Managing Director of
Ecosave Pte Ltd., a company whose business is focused on environmental biotech and energy
conservation technologies, a position he has held since April 2007. From January 1986 to April 2007,
Mr. Koh served as Chief Executive Officer and President of Toll Asia Pte Ltd formerly SembCorp
Logistics Ltd (SembLog), a Singapore public listed company, which was acquired by Toll in May 2006.
Mr. Koh has over 20 years of experience in the logistics industry. Mr. Koh holds a Bachelor of
Engineering, a Master of Business Administration and a Postgraduate Diploma in Business Law from the
University of Singapore (now known as the National University of Singapore). We believe Mr. Koh’s
qualifications to sit on the Board of Directors include his experience on other public company boards of
directors and his significant executive experience with companies including those focused on
environmental awareness, which has become a focus of NTIC during the past several years, especially in
light of NTIC’s Natur-Tec® bioplastics business. Mr. Koh’s previous board of director experience is
helpful in guiding NTIC with respect to corporate governance matters, particularly in his role as a
member of and former Chair of the Nominating and Corporate Governance Committee. Additionally,
Mr. Koh has specific executive experience with companies located in Asia, which is where several of
NTIC’s joint ventures and NTIC’s Chinese subsidiary are located.

Sunggyu Lee, Ph.D. has been a director of NTIC since January 2004. Dr. Lee is Chief Technologist,
Chemtech Innovators LLC, Akron, Ohio. Previously, he held positions of Russ Ohio Research Scholar
and Professor of Chemical and Biomolecular Engineering, Ohio University, Athens, Ohio from 2010 to
2020, Professor of Chemical and Biological Engineering, Missouri University of Science and
Technology, Rolla, Missouri from 2005 to 2010, C.W. LaPierre Professor and Chairman of Chemical
Engineering at University of Missouri-Columbia from 1997 to 2005, and Robert Iredell Professor and
Head of Chemical Engineering Department at the University of Akron, Akron, Ohio from 1988 to 1996.
He has authorized 12 books and over 550 archival publications and received 35 U.S. patents in a variety
of chemical and polymer processes and products. He is currently serving as Editor of Encyclopedia of
Chemical Processing, Taylor & Francis, New York, New York and also as Book Series Editor of Green
Chemistry and Chemical Engineering, CRC Press, Boca Raton, Florida. Throughout his career, he has
served as consultant and technical advisor to a number of national and international companies in the
fields of polymers, petrochemicals and energy. He received his Ph.D. from Case Western Reserve
University, Cleveland, Ohio in 1980. We believe Dr. Lee’s qualifications to sit on the Board of Directors
include his significant technical and industrial expertise with chemical and polymer processes and
products. Such expertise is particularly helpful with respect to assessing and operating NTIC’s Natur-
Tec® bioplastics business.

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief
Executive Officer since January 2006 and was appointed a director of NTIC in February 2004.
Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005.
Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice President of Strategic
Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter

Alia Holding Company, which is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch
held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project
management for BMW AG in Munich, Germany. Mr. Lynch received a Master of Business
Administration degree from the University of Michigan Ross School of Business. We believe
Mr. Lynch’s qualifications to sit on the Board of Directors include his depth of knowledge of NTIC and
its day-to-day operations in light of his position as Chief Executive Officer of NTIC, as well as his
affiliation with a significant stockholder of NTIC, which the Board of Directors believes generally helps
align management’s interests with those of our stockholders.

Ramani Narayan, Ph.D. has been a director of NTIC since November 2004. He is a Distinguished
Professor at Michigan State University in the Department of Chemical Engineering & Materials Science,
where he has 200+ refereed publications in leading journals to his credit, 19 patents, edited three books
and one expert dossier in the area of bio-based polymeric materials. His research encompasses design
and engineering of sustainable, biobased products, biodegradable plastics and polymers, biofiber
reinforced composites, reactive extrusion polymerization and processing, studies in plastic end-of-life
options like biodegradation and composting. He conducts carbon footprint calculations for plastics and
products. He also performs LCA (Life Cycle Assessment) for reporting a product’s environmental
footprint. He serves as Scientific Chair of the Biodegradable Products Institute (BPI), North America.
He served on the Technical Advisory Board of Tate & Lyle. He served on the Board of Directors of
ASTM International, an international standard setting organization and was the founding Chair of the
committee on Environmentally Degradable Plastics and Biobased Products (D20.96) and the Plastics
Terminology Committee (D20.92). Dr. Narayan is also the technical expert for the United States on ISO
(International Standards Organization) TC 61 on Plastics—specifically for Terminology, Biobased and
Biodegradable Plastics. He has won numerous awards, including the Named MSU University
Distinguished Professor in 2007; the Governors University Award for commercialization excellence;
Michigan State University Distinguished Faculty Award, 2006, 2005 Withrow Distinguished Scholar
award, Fulbright Distinguished Lectureship Chair in Science & Technology Management &
Commercialization (University of Lisbon; Portugal); First recipient of the William N. Findley Award,
The James Hammer Memorial Lifetime Achievement Award, and Research and Commercialization
Award sponsored by ICI Americas, Inc. & the National Corn Growers Association. We believe
Dr. Narayan’s qualifications to sit on the Board of Directors include his significant technical expertise in
the bioplastics area which has been helpful to NTIC’s management in assessing and operating NTIC’s
Natur-Tec® bioplastics business.

Richard J. Nigon has been a director of NTIC since February 2010 and non-executive Chairman of the
Board since November 2012. Mr. Nigon is the Senior Vice President of Cedar Point Capital, Inc., a
private company that raises capital for early stage companies. From February 2001 until May 2007,
Mr. Nigon was a Director of Equity Corporate Finance for Miller Johnson Steichen Kinnard (MJSK), a
privately held investment firm. In December 2006, MJSK was acquired by Stifel Nicolaus, and
Mr. Nigon was a Managing Director of Private Placements at Stifel Nicolaus. From February 2000 to
February 2001, Mr. Nigon served as the Chief Financial Officer of Dantis, Inc., a web hosting company.
Prior to joining Dantis, Mr. Nigon was employed by Ernst & Young, LLP from 1970 to 2000, where he
served as a partner from 1981 to 2000. While at Ernst & Young, Mr. Nigon served as the Director of
Ernst & Young’s Twin Cities Entrepreneurial Services Group and was the coordinating partner on several
publicly-traded companies in the consumer retailing and manufacturing sectors. In addition to NTIC,
Mr. Nigon also serves on the board of directors of Tactile Systems Technology, Inc. and as chairperson of
its audit committee, on the board of directors of Celcuity Inc. and as chairperson of its audit committee
and serves on the board of directors of a number of privately-held companies. Mr. Nigon previously
served on the board of directors of Virtual Radiologic Corporation and Vascular Solutions, Inc. until its
acquisition by Teleflex Incorporated in February 2017. Through his 30 years of service at Ernst &
Young, LLP, Mr. Nigon brings to NTIC’s Board of Directors, and in particular the Audit Committee,

extensive public accounting and auditing experience. The Board believes Mr. Nigon’s strong background
in financial controls and reporting, financial management, financial analysis and SEC reporting
requirements is critical to the Board’s oversight responsibilities. In addition, his strategic planning
expertise and other experiences gained through his management and leadership roles at private investment
firms that have invested in early stage companies, is helpful to the Board in assessing and operating
NTIC’s newer businesses.

Konstantin von Falkenhausen has been a director of NTIC since November 2012. Mr. von Falkenhausen
is currently a Partner of B Capital Partners AG, an independent investment advisory boutique focused on
infrastructure, public private partnerships and clean energy. In this capacity, since April 2018, Mr. von
Falkenhausen has been a Director of the general partner of the B Capital Energy Transition Infrastructure
Fund SICAV-SIF, an investment fund registered with the Luxembourg financial authorities CSSF. From
February 2004 to March 2008, Mr. von Falkenhausen served as a Partner of capiton AG, a private equity
firm. From March 2003 to February 2004, he served as interim Chief Financial Officer of Neon Products
GmbH, a privately held neon lighting company. From May 1999 to February 2003, Mr. von
Falkenhausen served as an investment manager of West Private Equity Ltd. and an investment director of
its German affiliate West Private Capital GmbH. Prior to May 1999, Mr. von Falkenhausen served in
several positions with BankBoston Robertson Stephens International Ltd., an investment banking firm.
Mr. von Falkenhausen is a citizen of Germany. He has a Master’s degree in economics (lic. oec) from the
University of Fribourg (Switzerland) and a Masters of Business Administration from the University of
Chicago. We believe Mr. von Falkenhausen’s qualifications to sit on the Board of Directors include his
experience with several private investment and equity firms that have invested in early stage companies,
which the Board believes is helpful in assessing and operating NTIC’s newer businesses, and his financial
expertise, which the Board believes is helpful in analyzing NTIC’s financial performance.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of all of the eight nominees
named above.

PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION

________________

Introduction

The Board of Directors is providing stockholders with an advisory vote on executive compensation
pursuant to the Dodd-Frank Wall Street Consumer Protection Act and Section 14A of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). This advisory vote, commonly known as a
“say-on-pay” vote, is a non-binding vote on the compensation paid to our named executive officers as set
forth in the “Executive Compensation” section of this proxy statement beginning on page 56. At the 2020
Annual Meeting of Stockholders held on January 17, 2020, over 99% of the votes cast by our
stockholders were in favor of our say-on-pay vote. The Compensation Committee generally believes that
such results affirmed stockholder support of our approach to executive compensation.

Our executive compensation program is generally designed to attract, retain, motivate and reward highly
qualified and talented executive officers. The underlying core principles of our executive compensation
program are:

(cid:120) To align the interests of our executives with those of our stockholders;

(cid:120)

Integrate compensation with our business plans and strategic goals;

(cid:120) Link amount of compensation to both company and individual performance goals; and

(cid:120) Provide fair and competitive compensation opportunities that attract and retain executives.

The “Executive Compensation” section of this proxy statement, which begins on page 56, describes our
executive compensation program and the executive compensation decisions made by the Compensation
Committee and Board of Directors for fiscal 2020 in more detail. Important considerations include:

(cid:120) A significant portion of the compensation paid or awarded to our named executive officers in
fiscal 2020 was “performance-based” or “at-risk” compensation that is tied directly to the
achievement of financial and other performance goals or long-term stock price performance.

(cid:120) Equity-based compensation granted to our named executive officers is in the form of stock

options and aligns the long-term interests of our executives with the long-term interests of our
stockholders. In response to a concern raised by one of our stockholders, stock options
granted to our executives now vest annually over a three-year period as opposed to a one-year
period.

(cid:120) Our executive officers receive only modest perquisites and have modest severance and

change-in-control arrangements.

(cid:120) We have adopted a clawback policy.

(cid:120) We do not provide any tax “gross-up” payments.

Accordingly, the Board of Directors recommends that our stockholders vote in favor of the say-on-pay
vote as set forth in the following resolution:

RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our

named executive officers, as disclosed in this proxy statement.

Stockholders are not ultimately voting to approve or disapprove the recommendation of the Board of
Directors. As this is an advisory vote, the outcome of the vote is not binding on us with respect to future
executive compensation decisions, including those relating to our named executive officers, or otherwise.
The Compensation Committee and Board of Directors expect to take into account the outcome of this
advisory vote when considering future executive compensation decisions.

In accordance with the result of the advisory vote on the frequency of the say-on-pay vote, which was
conducted at our 2020 Annual Meeting of Stockholders, the Board of Directors has determined that we
will conduct an executive compensation advisory vote on an annual basis. Accordingly, after this Annual
Meeting, the next say-on-pay vote will occur at our next Annual Meeting of Stockholders anticipated to
be held in January 2022. We anticipate that the next say-on-frequency vote will occur at our 2026 Annual
Meeting of Stockholders.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR approval, on an advisory basis, of the
compensation paid to our named executive officers, as disclosed in this proxy statement.

PROPOSAL THREE—RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_________________

Selection of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors selects our independent registered public accounting firm.
In this regard, the Audit Committee evaluates the qualifications, performance and independence of our
independent registered public accounting firm and determines whether to re-engage our current
independent registered public accounting firm. As part of its evaluation, the Audit Committee considers,
among other factors, the quality and efficiency of the services provided by the firm, including the
performance, technical expertise, and industry knowledge of the lead audit partner and the audit team
assigned to our account; the overall strength and reputation of the firm; its global capabilities relative to
our business; and its knowledge of our operations. Additionally, the Audit Committee considers the
impact of a change of independent registered public accounting firm. Upon consideration of these and
other factors, the Audit Committee believes the selection of Baker Tilly US, LLP (formerly known as
Baker Tilly Virchow Krause, LLP) (“Baker Tilly”) as our independent registered public accounting firm
for the fiscal year ending August 31, 2021 is in the best interests of NTIC and its stockholders. Baker
Tilly has served as our independent registered public accounting firm since 2004.

Although it is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit
Committee’s selection of Baker Tilly as a matter of good corporate governance. If our stockholders do
not ratify the selection of Baker Tilly, another independent registered public accounting firm will be
considered by the Audit Committee. Even if the selection is ratified by our stockholders, the Audit
Committee in its discretion may change the appointment at any time during the year, if it determines that
such a change would be in the best interests of NTIC and our stockholders.

Representatives of Baker Tilly will be present at the Annual Meeting to respond to appropriate questions.
They also will have the opportunity to make a statement if they wish to do so.

Audit, Audit-Related, Tax and Other Fees

The following table presents the aggregate fees billed to us by Baker Tilly for the fiscal years ended
August 31, 2020 and August 31, 2019.

Audit Fees(1) .........................................................
Audit-Related Fees(2) ............................................
Tax Fees ...............................................................
All Other Fees ......................................................

Aggregate Amount Billed by
Baker Tilly ($)

Fiscal 2020
$

386,570
—
—
—

Fiscal 2019
$

478,522
6,000
—
—

(1)

These fees consisted of the audit of our annual financial statements by year, review of financial statements
included in our quarterly reports on Form 10-Q and other services normally provided in connection with
statutory and regulatory filings or engagements.

(2)

Audit-related fees represent fees for services relating to registration statement filings.

Audit Committee Pre-Approval Policies and Procedures

All services rendered by Baker Tilly to NTIC were permissible under applicable laws and regulations and
all services provided to NTIC, other than de minimis non-audit services allowed under applicable law,
were approved in advance by the Audit Committee. The Audit Committee has not adopted any formal
pre-approval policies and procedures.

Board Recommendation

The Board of Directors unanimously recommends that stockholders vote FOR ratification of the selection
of Baker Tilly as our independent registered public accounting firm for the fiscal year ending August 31,
2021.

PROPOSAL FOUR—APPROVAL OF THE NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION AMENDED AND RESTATED 2019 STOCK INCENTIVE PLAN
_________________

Background and Proposed Amendments

On November 6, 2020, the Board of Directors, upon recommendation of the Compensation Committee,
approved, subject to approval by our stockholders, the Northern Technologies International Corporation
Amended and Restated 2019 Stock Incentive Plan (the “Amended 2019 Plan”), which incorporates
certain amendments to the existing plan (the “2019 Plan”). The Amended 2019 Plan incorporates an
amendment to increase the number of shares of NTIC common stock available for issuance under the plan
by an additional 800,000 shares and an increase to the limit on incentive stock options commensurate
with the overall share authorization. The Amended 2019 Plan also contains a new limit on overall non-
employee director compensation of $200,000 per year or $250,000 in the case of a non-employee
chairman, lead independent director, or non-employee director in the first year of service on the Board of
Directors. This proposed limit on non-employee director compensation will be in lieu of the currently
existing limit on the number of shares subject to awards granted to a non-employee director each year.

The Amended 2019 Plan permits the grant of incentive and non-statutory stock options, stock
appreciation rights, or “SARs,” restricted stock awards, restricted stock units, or “RSUs,” performance
awards, and other stock-based awards. Our continuing ability to offer equity incentive awards under the
2019 Plan is critical to our ability to attract and retain qualified individuals to perform services, provide
incentive compensation for such individuals in a form that is linked to the growth and profitability of
NTIC and increases in stockholder value, and provide opportunities for equity participation that align the
interests of recipients with those of our stockholders.

The Board of Directors is asking our stockholders to approve the Amended 2019 Plan as required by the
Listing Rules of the Nasdaq Stock Market. If our stockholders approve the Amended 2019 Plan, the
Amended 2019 Plan will become effective as of the date of stockholder approval. If our stockholders do
not approve the Amended 2019 Plan, the 2019 Plan, as currently in effect, will remain in effect until it
terminates in accordance with its terms.

Reasons Why You Should Vote in Favor of the Amended 2019 Plan

The Board of Directors recommends a vote “FOR” the approval of the Amended 2019 Plan because the
Board of Directors believes the proposed Amended 2019 Plan is in the best interests of NTIC and its
stockholders for the following reasons:

(cid:120) Aligns directors, employee and stockholder interests. We currently provide long-term incentives
in the form of stock option grants to our non-employee directors, executive officers and other key
employees. We believe that our stock-based compensation program helps align the interests of
our directors, executive officers and other key employees with our stockholders. We believe that
our long-term stock-based incentives help promote long-term retention of our employees and
encourage ownership of our common stock. If the Amended 2019 Plan is approved, we will be
able to maintain our means of aligning the interests of our directors, executive officers and other
key employees with the interests of our stockholders.

(cid:120) Attracts and retains talent. Talented, motivated and effective directors, executives and

employees are essential to executing our business strategies. Stock-based and annual cash
incentive compensation has been an important component of total compensation at NTIC for
many years because such compensation enables us to effectively recruit executives and other

employees while encouraging them to act and think like owners of NTIC. If the Amended 2019
Plan is approved, we believe we will maintain our ability to offer competitive compensation
packages to both retain our best performers and attract new talent.

(cid:120) Supports our pay-for-performance philosophy. We believe that stock-based compensation, by its

very nature, is performance-based compensation. We use incentive compensation to help
reinforce desired financial and other business results to our executives and to motivate them to
make decisions to produce those results.

(cid:120) Protects stockholder interests and embraces sound stock-based compensation practices. As

described in more detail below under “Summary of Sound Governance Features of the Amended
2019 Plan,” the Amended 2019 Plan includes a number of features that are consistent with the
interests of our stockholders and sound corporate governance practices.

Summary of Sound Governance Features of the Amended 2019 Plan

The Board of Directors and Compensation Committee believe that the Amended 2019 Plan contains
several features that are consistent with the interests of our stockholders and sound corporate governance
practices, including the following:

(cid:57) No automatic share replenishment or

(cid:57) Members of the committee administering the

“evergreen” provision

plan are non-employee and independent directors

(cid:57) Will not be excessively dilutive to our

(cid:57) Stockholder approval is required for material

stockholders

revisions to the Amended 2019 Plan

(cid:57) Limit on number of “full value” awards
(cid:57) No liberal share counting or “recycling” of

shares from exercised stock options, SARs or
other stock-based awards

(cid:57) No reload stock options or SARs
(cid:57) No re-pricing of “underwater” stock options
or SARs without stockholder approval

(cid:57) No “tax gross-ups”
(cid:57) Options, SARs and unvested performance awards
are not entitled to dividend equivalent rights and
no dividends will be paid on unvested awards
(cid:57) Limits on non-employee director compensation
(cid:57) Stock option and SAR exercise prices will not be
lower than the fair market value on the grant date

(cid:57) “Clawback” provisions

Background for Shares Authorized for Issuance

If the Amended 2019 Plan is approved, the maximum number of shares of common stock available for
issuance under the Amended 2019 Plan will be 1,600,000 shares, plus the number of shares subject to
awards outstanding under the prior Northern Technologies International Corporation Amended and
Restated 2007 Stock Incentive Plan (the “Prior Plan”) as of January 18, 2019 but only to the extent that
such outstanding awards are forfeited, expire or otherwise terminate without the issuance of such shares.
As of November 18, 2020, 720,644 shares of common stock were subject to outstanding awards under the
2019 Plan, and 79,356 shares of common stock remained available for issuance under the 2019 Plan.

In determining the number of shares of common stock by which to increase the Amended 2019 Plan, the
Board of Directors and Compensation Committee considered a number of factors, which are discussed
further below, including:

(cid:120) Shares currently available under the 2019 Plan and total outstanding equity-based awards and

how long the shares available are expected to last;

(cid:120) Historical equity award granting practices, including our three-year average share usage rate

(commonly referred to as “burn rate”); and

(cid:120) Potential dilution.

Shares Available and Outstanding Equity Awards

While the use of long-term incentives, in the form of equity awards, is an important part of our
compensation program, we are mindful of our responsibility to our stockholders to exercise judgment in
the granting of equity awards. In setting the number of shares of common stock available for issuance
under the Amended 2019 Plan, the Board of Directors and Compensation Committee also considered
shares currently available under the 2019 Plan and total outstanding equity awards and how long the
shares available under the 2019 plan are expected to last. To facilitate approval of the Amended 2019
Plan, set forth below is certain information about our shares of common stock that may be issued under
our equity compensation plans as of November 18, 2020.

As of November 18, 2020,

(cid:120) we had 9,104,636 shares of common stock issued and outstanding. The market value of one

share of common stock on November 18, 2020, as determined by reference to the closing price as
reported on the Nasdaq Global Market, was $8.89;

(cid:120) 720,644 shares were subject to outstanding stock options under the 2019 Plan and 827,198 shares

were subject to outstanding stock options under the prior equity compensation plan; and

(cid:120) 79,356 shares remained available for issuance under the 2019 Plan.

Historical Equity Award Granting Practices

In setting the number of shares of common stock authorized for issuance under the Amended 2019 Plan,
the Board of Directors and Compensation Committee also considered the historical number of equity
awards granted under the 2019 Plan in each of the last three fiscal years. The following table sets forth
information regarding awards granted and earned and the annual burn rate for each of the last three fiscal
years. The only equity awards granted during the last three fiscal years are stock options. Share and per
share data have been adjusted to reflect our two-for-one stock split that was effective June 28, 2019.

Stock options granted
Weighted average basic common shares outstanding
during fiscal year
Burn rate

Fiscal 2020
300,770

Fiscal 2019

141,767

Fiscal 2018
94,504

9,104,636
3.3%

9,085,584
1.6%

9,077,676
1.0%

The Board of Directors and Compensation Committee also considered our three-year average burn rate
(fiscal 2018 to fiscal 2020) of approximately 1.97%, which is much lower than the industry thresholds
established by certain major proxy advisory firms.

Based on historical and anticipated granting practices and the recent trading price of our common stock,
we expect the additional shares authorized for issuance by the Amended 2019 Plan to cover awards for
approximately three to four years. However, we cannot predict our future equity grant practices, the
future price of our shares, or future hiring activity with any degree of certainty at this time, and the share
increase provided by the Amended 2019 Plan could last for a shorter or longer time.

Potential Dilution

As of November 18, 2020, NTIC’s capital structure consisted of 9,104,636 shares of common stock
outstanding. As described above, 720,644 shares have been granted under the 2019 Plan, and 79,356
shares remained available for grant as of November 18, 2020.

In setting the number of shares of common stock authorized for issuance under the Amended 2019 Plan,
the Board of Directors and Compensation Committee also considered the potential dilution (often referred
to as overhang) that would result by approval of the Amended 2019 Plan, including the policies of certain
institutional investors and major proxy advisory firms. Potential dilution is as set forth in the table below,
as of November 18, 2020, assuming approval of the Amended 2019 Plan. The additional 800,000 shares
represent approximately 7.5% of our fully diluted shares of common stock assuming the Amended 2019
Plan is approved, as described in the table below.

Options Outstanding
Weighted Average Exercise Price of Options Outstanding
Weighted Average Remaining Term of Options Outstanding
Total Equity Grants Outstanding (Including Options)
Shares Available for Future Grant under the 2019 Plan
Additional Shares Requested
Total Potential Overhang under the Amended 2019 Plan(1)
Common Stock Outstanding
Fully Diluted Shares of Common Stock(2)
Potential Dilution of 800,000 Additional Shares as a Percentage of Fully
Diluted Shares of Common Stock Outstanding

Assuming Approval of
Amended 2019 Plan

1,547,842
$ 9.26
6.9 years
1,547,842
79,356
800,000
2,427,198
9,104,636
11,531,834

6.9%

(1) Total Potential Overhang consists of (i) 1,547,842 total shares subject to outstanding awards as of November
18, 2020, plus (ii) 79,356 shares available for future grant under the 2019 Plan as of November 18, 2020, plus
(iii) 800,000 additional shares requested under the Amended 2019 Plan.

(2) Fully Diluted Shares of Common Stock consists of the shares of common stock outstanding as of November 18,

2020, plus the Total Potential Overhang under the Amended 2019 Plan.

Summary of the Amended 2019 Plan Features

The major features of the Amended 2019 Plan are summarized below. The summary is qualified in its
entirety by reference to the full text of the Amended 2019 Plan, a copy of which may be obtained from us.
A copy of the Amended 2019 Plan also has been filed electronically with the Securities and Exchange
Commission, or SEC, as an appendix to this proxy statement, and is available through the SEC’s website
at www.sec.gov.

Purpose. The purpose of the Amended 2019 Plan is to advance the interests of NTIC and its stockholders
by enabling us to attract and retain qualified individuals through opportunities for equity participation in
NTIC and to reward those individuals who contribute to the achievement of our economic objectives.

Eligibility. All employees (including officers and directors who are also employees), non-employee
directors, consultants, advisors and independent contractors of NTIC or any subsidiary will be eligible to
receive incentive awards under the Amended 2019 Plan. As of November 18, 2020, there were
approximately 90 persons who would be eligible to receive awards under the Amended 2019 Plan.
Although not necessarily indicative of future grants under the Amended 2019 Plan, 15 employees, or
approximately 16% of the approximately 90 eligible recipients, have been granted awards under the 2019
Plan.

Shares Available for Issuance. The maximum number of shares of our common stock available for
issuance under the Amended 2019 Plan will be 1,600,000 shares plus the number of shares subject to
awards outstanding under the Prior Plan as of January 18, 2019 but only to the extent that such
outstanding awards are forfeited, expire or otherwise terminate without the issuance of such shares. The
number of shares available for issuance under the Amended 2019 Plan is subject to increase to the extent
that we issue shares or incentive awards under the Amended 2019 Plan in connection with certain merger
and acquisition transactions, or assume any plan in a merger or acquisition transaction. However, any
available shares in an assumed plan may only be utilized to the extent permitted under the Listing Rules
of the Nasdaq Stock Market. No more than 1,600,000 total shares may be granted as incentive stock
options.

Shares of our common stock that are issued under the Amended 2019 Plan or that are potentially issuable
pursuant to outstanding incentive awards reduce the number of shares remaining available. All shares so
subtracted from the amount available under the plan with respect to an incentive award that lapses,
expires, is forfeited or for any reason is terminated, unexercised or unvested and any shares of our
common stock that are subject to an incentive award that is settled or paid in cash or any other form other
than shares of our common stock will automatically again become available for issuance under the
Amended 2019 Plan. However, any shares not issued due to the exercise of an option by a “net exercise”
or the tender or attestation as to ownership of previously acquired shares (as described below), as well as
shares covered by a stock appreciation right, to the extent exercised, and shares withheld by us to satisfy
any tax withholding obligations will not again become available for issuance under the Amended 2019
Plan. Any shares of our common stock that we repurchase on the open market using the proceeds from
the exercise of an award under the Amended 2019 Plan will not increase the number of shares available
for future grants of awards under the Amended 2019 Plan.

Non-Employee Director Compensation Limit. The Amended 2019 Plan will contain a new limit on total
non-employee director compensation. Under this new limit, the sum of any cash compensation, or other
compensation, and the value (determined as of the grant date in accordance with Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, or any successor
thereto) of awards granted to a non-employee director as compensation for services as a non-employee
director during any fiscal year of NTIC may not exceed $200,000 (increased to $250,000 with respect to
any non-employee director serving as chairman of the Board of Directors or lead independent director or
in the fiscal year of a non-employee director’s initial service as a non-employee director). Any
compensation that is deferred will count towards this limit for the year in which the compensation is first
earned, and not a later year of settlement.

Grant Limits. Under the terms of the Amended 2019 Plan:

(cid:120) no more than 1,600,000 shares of our common stock may be issued pursuant to the exercise of

incentive stock options; and

(cid:120) no more than 800,000 shares of our common stock may be issued or issuable in connection with

full-value awards.

All of the share limitations in the Amended 2019 Plan may be adjusted to reflect changes in our corporate
structure or shares, as described below. In addition, the number of shares that may be issued as incentive
options or other incentive awards will not apply to certain incentive awards granted upon our assumption
or substitution of like awards in any merger or acquisition.

Adjustments. In the event of any reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other similar change in our corporate structure or
shares, we must adjust:

(cid:120)

the number and kind of securities available for issuance under the Amended 2019 Plan; and

in order to prevent dilution or enlargement of the rights of participants, the number, kind and,
where applicable, the exercise price of securities subject to outstanding incentive awards.

Administration. The Amended 2019 Plan is administered by our Board of Directors or by a committee of
the Board. Any such committee will consist of at least two members of the Board, all of whom are “non-
employee directors” within the meaning of Rule 16b-3 under the Exchange Act, and all of whom are
“independent” as required by the listing standards of the Nasdaq Stock Market. We expect both the
Board of Directors and the Compensation Committee of the Board of Directors to administer the
Amended 2019 Plan. The Board of Directors or the committee administering the Amended 2019 Plan is
referred to as the “committee.” The committee may delegate its duties, power and authority under the
Amended 2019 Plan to any of our officers to the extent consistent with applicable Delaware corporate
law, except with respect to participants subject to Section 16 of the Exchange Act.

The committee has the authority to determine all provisions of incentive awards consistent with terms of
the Amended 2019 Plan, including, the eligible recipients who will be granted one or more incentive
awards under the Amended 2019 Plan, the nature and extent of the incentive awards to be made to each
participant and the form of an incentive award agreement, the time or times when incentive awards will
be granted, the duration of each incentive award, and the restrictions and other conditions to which the
payment or vesting of incentive awards may be subject. The committee has the authority to pay the
economic value of any incentive award or settle any incentive award in the form of cash, our common
stock or any combination of both, construe and interpret the Amended 2019 Plan and incentive awards,
determine fair market value of NTIC common stock, determine whether incentive awards will be adjusted
for dividend equivalents and may amend or modify the terms of outstanding incentive awards (except for
any prohibited “re-pricing” of options, discussed below) so long as the amended or modified terms are
permitted under the Amended 2019 Plan and any adversely affected participant has consented to the
amendment or modification.

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification,
stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin off) or any other similar change in corporate structure or shares; any purchase,
acquisition, sale, disposition or write-down of a significant amount of assets or a significant business; any
change in accounting principles or practices, tax laws or other such laws or provisions affecting reported
results; any uninsured catastrophic losses or extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 or in management’s discussion and analysis of financial performance
appearing in our annual report to stockholders for the applicable year; or any other similar change, in each
case with respect to NTIC or any other entity whose performance is relevant to the grant or vesting of an
incentive award, the committee (or, if NTIC is not the surviving corporation in any such transaction, the
board of directors of the surviving corporation) may, without the consent of any affected participant,
amend or modify the vesting criteria of any outstanding incentive award that is based in whole or in part

on the financial performance of NTIC (or any subsidiary or division or other subunit thereof) or such
other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating
such financial performance of NTIC or such other entity will be substantially the same (in the sole
discretion of the committee or the board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the amended or modified terms are permitted by the
Amended 2019 Plan as then in effect.

The committee may, in its sole discretion, amend the terms of the Amended 2019 Plan or incentive
awards with respect to participants resident outside of the United States or employed by a non-U.S.
subsidiary in order to comply with local legal requirements, to otherwise protect our or subsidiary’s
interests, or to meet objectives of the Amended 2019 Plan, and may, where appropriate, establish one or
more sub-plans for the purposes of qualifying for preferred tax treatment under foreign tax laws. This
authority does not, however, permit the committee to take any action:

(cid:120)

to reserve shares or grant incentive awards in excess of the limitations provided in the Amended
2019 Plan;

to effect any re-pricing of options, as discussed below;

to grant options or stock appreciation rights having an exercise price less than 100% of the “fair
market value” (as defined below) of one share of our common stock on the date of grant; or

for which stockholder approval would then be required pursuant to Section 422 of the Code or the
Listing Rules of the Nasdaq Stock Market or other applicable market or exchange.

Except in connection with certain specified changes in our corporate structure or shares, the committee
may not, without prior approval of our stockholders, seek to effect any re-pricing of any previously
granted, “underwater” option or stock appreciation right by:

(cid:120)

amending or modifying the terms of the underwater option or stock appreciation right to lower
the exercise price;

canceling the underwater option or stock appreciation right in exchange for cash, replacement
options or stock appreciation rights having a lower exercise price, or other incentive awards; or

repurchasing the underwater options and stock appreciation rights and granting new incentive
awards under the Amended 2019 Plan.

For purposes of the Amended 2019 Plan, an option or stock appreciation right is deemed to be
“underwater” at any time when the fair market value of the our common stock is less than the exercise
price.

Options. The exercise price to be paid by a participant at the time an option is exercised may not be less
than 100% of the fair market value of one share of our common stock on the date of grant (or 110% of the
fair market value of one share of our common stock on the date of grant of an incentive option if the
participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes
of stock of NTIC or any parent or subsidiary). However, in the event options are granted as a result of
our assumption or substitution of options in a merger or acquisition, the exercise price will be the price
determined by the committee pursuant to the conversion terms applicable to the transaction. At any time
while the our common stock is listed on the Nasdaq Stock Market, “fair market value” under the
Amended 2019 Plan means the mean between the reported high and low sale price of a share at the end of

the regular trading session as reported by the Nasdaq Global Market as of the date in question (or, if no
shares were traded on such date, the next preceding day on which there was such a trade). As of
November 18, 2020, the closing sale price of a share of our common stock on the Nasdaq Global Market
was $8.89.

The total purchase price of the shares to be purchased upon exercise of an option will be paid entirely in
cash; provided, however, that the committee may allow exercise payments to be made, in whole or in
part, by delivery of a broker exercise notice (pursuant to which a broker or dealer is irrevocably instructed
to sell enough shares or loan the optionee enough money to pay the exercise price and to remit such sums
to us), by tender or attestation as to ownership of shares of our common stock that are acceptable to the
committee, by a “net exercise” of the option or by a combination of such methods. In the case of a “net
exercise” of an option, we will not require a payment of the exercise price of the option from the
participant but will reduce the number of shares of our common stock issued upon the exercise by the
largest number of whole shares having a fair market value that does not exceed the aggregate exercise
price for the shares exercised. Any shares of our common stock tendered or covered by an attestation will
be valued at their fair market value on the exercise date.

Options may be exercised in whole or in installments, as determined by the committee, and the committee
may impose conditions or restrictions to the exercisability of an option, including that the participant
remain continuously employed by us for a certain period or that the participant or us (or any subsidiary,
division or other subunit of NTIC) satisfy certain specified objectives. An option may not become
exercisable, nor remain exercisable after 10 years from its date of grant (five years from its date of grant
in the case of an incentive option if the participant owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of NTIC or any parent or subsidiary).

Options may, but need not, include a provision whereby the participant may elect at any time before the
participant’s employment or service terminates to exercise the option as to any part or all of the shares
subject to the option prior to the full vesting of the option. Any unvested shares so purchased will be
subject to a repurchase option in favor of us and to any other restriction the committee determines to be
appropriate.

Stock Appreciation Rights. A stock appreciation right is the right to receive a payment from us, in the
form of shares of our common stock, cash or a combination of both, equal to the difference between the
fair market value of one or more shares of our common stock and a specified exercise price of such
shares. Stock appreciation rights will be subject to such terms and conditions, if any, consistent with the
other provisions of the plan, as may be determined by the committee. The committee will have the sole
discretion to determine the form in which payment of the economic value of stock appreciation rights will
be made to a participant (i.e., cash, our common stock or any combination thereof) or to consent to or
disapprove the election by a participant of the form of such payment.

The exercise price of a stock appreciation right will be determined by the committee, in its discretion, at
the date of grant but may not be less than 100% of the fair market value of one share of our common
stock on the date of grant, except as provided below in connection with certain “tandem” grants (as
further defined below). However, in the event that stock appreciation rights are granted as a result of our
assumption or substitution of stock appreciation rights in a merger or acquisition, the exercise price will
be the price determined by the committee pursuant to the conversion terms applicable to the transaction.

A stock appreciation right will become exercisable at such time and in such installments as may be
determined by the committee in its sole discretion at the time of grant; provided, however, that no stock
appreciation right may be exercisable after 10 years from its date of grant.

Stock appreciation rights may be granted alone or in addition to other incentive awards, or in tandem with
an option, either at the time of grant of the option or at any time thereafter during the term of the option.
A stock appreciation right granted in tandem with an option shall cover the same number of shares of our
common stock as covered by the option (or such lesser number as the committee may determine), shall be
exercisable at such time or times and only to the extent that the related option is exercisable, have the
same term as the option and will have an exercise price equal to the exercise price for the option. Upon
the exercise of a stock appreciation right granted in tandem with an option, the option shall be canceled
automatically to the extent of the number of shares covered by such exercise; conversely, upon exercise
of an option having a related stock appreciation right, the stock appreciation right will be canceled
automatically to the extent of the number of shares covered by the option exercise.

Restricted Stock Awards and Restricted Stock Units. A restricted stock award and restricted stock units
are awards of our common stock that vest at such times and in such installments as may be determined by
the committee and, until the incentive award vest, is subject to restrictions on transferability and the
possibility of forfeiture. The committee may impose such restrictions or conditions to the vesting of
restricted stock awards or restricted stock units as it deems appropriate, including that the participant
remain continuously employed by us for a certain period or that the participant or us (or any subsidiary,
division or other subunit of NTIC) satisfy specified objectives. To enforce the restrictions, the committee
may place a legend on the stock certificates referring to such restrictions and may take other steps to
enforce the restrictions. Restricted stock units are similar to restricted stock awards except that no shares
of our common stock are actually awarded on the grant date of the restricted stock unit and are
denominated in shares of our common stock but paid in cash, shares of our common stock or a
combination of cash and shares of our common stock.

Unless the committee determines otherwise, any dividends (including regular quarterly cash dividends) or
distributions paid with respect to shares of our common stock subject to the unvested portion of a
restricted stock award will be subject to the same restrictions as the shares to which such dividends or
distributions relate.

In the committee’s discretion, any restricted stock units awarded under the Amended 2019 Plan may carry
with it a right to dividend equivalents. Such right would entitle the participant to be credited with an
amount equal to all cash dividends paid on one share of our common stock while the restricted stock unit
is outstanding. Dividend equivalents may be converted into additional restricted stock units and may be
made subject to the same conditions and restricted as the restricted stock units to which they attach.
Settlement of dividend equivalents may be made in the form of cash, in the form of shares of our common
stock, or in a combination of both. Dividend equivalents as to restricted stock units will be subject to
forfeiture and termination to the same extent as the corresponding restricted stock units as to which the
dividend equivalents relate. In no event will participants holding restricted stock units receive any
dividend equivalents on such restricted stock units until the vesting provisions of such restricted stock
units lapse. Additionally, unless the Amended 2019 Plan provides otherwise, a participant will have all
voting, liquidation and other rights with respect to shares of our common stock issued to the participant as
a restricted stock award upon the participant becoming the holder of record of such shares as if the
participant were a holder of record of shares of our unrestricted common stock. A participant will have
no voting rights to any restricted stock units granted under the Amended 2019 Plan.

Performance Award. A participant may be granted one or more performance awards under the Amended
2019 Plan, and such performance awards will be subject to such terms and conditions, if any, consistent
with the other provisions of the Amended 2019 Plan, as may be determined by the committee in its sole
discretion, including, but not limited to, the achievement of one or more specified objectives; provided,
however, that in all cases payment of the performance award will be made within two and one-half
months following the end of the tax year during which receipt of the performance award is no longer

subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code, except upon
certain conditions.

Performance Criteria. The committee may grant incentive awards contingent upon achievement of
performance goals, including the following, without limitation: net sales; operating income; income
before income taxes; income before interest, taxes, depreciation and amortization; income before income
taxes; income before interest, taxes, depreciation and amortization and other non-cash items; net income;
net income per share (basic or diluted); profitability as measured by return ratios (including return on
assets, return on equity, return on capital, return on investment and return on sales); cash flows; market
share; cost of sales; sales, general and administrative expense, cost reduction goals; margins (including
one or more of gross, operating and net income margins); stock price; total return to stockholders;
economic value added; working capital and strategic plan development and implementation. The
committee may select one criterion or multiple criteria for measuring performance, and the measurement
may be based on NTIC, any NTIC subsidiary or NTIC’s business unit performance, either absolute or by
relative comparison to prior periods or other companies or any other external measure of the selected
criteria.

Other Stock-Based Awards. A recipient may be granted one or more other stock-based awards under the
Amended 2019 Plan, and such other-stock based awards will be subject to such terms and conditions,
consistent with the other provisions of the Amended 2019 Plan, as may be determined by the committee
in its sole discretion in such amounts and subject to such terms and conditions as the committee will
determine. Such other-stock based awards may involve the transfer of actual shares of our common stock
to participants as a bonus or in lieu of obligations to pay cash or deliver other property under the
Amended 2019 Plan or under other plans or compensatory arrangements, or payment in cash or otherwise
of amounts based on the value of shares of our common stock.

Change in Control. In the event a “change in control” of NTIC occurs, then, if approved by the
committee in its sole discretion either at the time of the grant of the incentive award or at any time after
such grant, all options and stock appreciation rights will become immediately exercisable in full and will
remain exercisable for the remainder of their terms; all outstanding restricted stock awards will become
immediately fully vested and non-forfeitable; and any conditions to the payment of restricted stock units,
performance awards and other stock-based awards will lapse.

In addition, the committee in its sole discretion may determine that some or all participants holding
outstanding incentive awards, whether or not exercisable or vested, will be canceled and terminated and
what the participant will receive for each share of our common stock subject to such incentive award a
cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and
securities with a fair market value) equal to the difference, if any, between the consideration received by
our stockholders in respect of a share of common stock in connection with such change in control and the
purchase price per share, if any, under the incentive award, multiplied by the number of shares of our
common stock subject to such incentive award; provided, however, that if such product is zero ($0) or
less or to the extent that the incentive award is not then exercisable, the incentive award may be canceled
and terminated without payment therefor.

For purposes of the Amended 2019 Plan a “change in control” of NTIC occurs upon:

(cid:120)

the sale, lease, exchange or other transfer of substantially all of the assets of NTIC (in one
transaction or in a series of related transaction) to a person or entity that is not controlled, directly
or indirectly, by NTIC;

(cid:120)

a merger or consolidation to which NTIC is a party if our stockholders immediately prior to
effective date of such merger or consolidation do not have “beneficial ownership” (as defined in
Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or
consolidation of more than 80% of the combined voting power of the surviving corporation’s
outstanding securities ordinarily having the right to vote at elections of directors; or

a change in control of NTIC of a nature that would be required to be reported pursuant to Section
13 or 15(d) of the Exchange Act, whether or not NTIC is then subject to such reporting
requirements, including, without limitation, such time as (i) any person becomes, after the
effective date of the Amended 2019 Plan, the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 40% or more of the combined voting power of our
outstanding securities ordinarily having the right to vote at elections of directors, or (ii)
individuals who constitute the Board of Directors on the effective date of the Amended 2019 Plan
cease for any reason to constitute at least a majority of the Board of Directors, provided that any
person becoming a director subsequent to the effective date of the Amended 2019 Plan whose
election, or nomination for election by our stockholders, was approved by a vote of at least a
majority of the directors comprising the Board of Directors on the effective date of the Amended
2019 Plan will, for purposes of this clause (ii), be considered as though such persons were a
member of the Board of Directors on the effective date of the Amended 2019 Plan.

Effect of Termination of Employment or Other Services. If a participant ceases to be employed by, or
perform other services for, us, all incentive awards held by the participant will be treated as set forth
below unless otherwise expressly provided by the committee in its sole discretion in an incentive award
agreement of the terms of an individual agreement or modified by the committee in its discretion as set
forth below. Upon termination due to death, disability or retirement, all outstanding, exercisable options
and stock appreciation rights then held by the participant will remain exercisable for a period of
12 months thereafter (but in no event after the expiration date of any such option or stock appreciation
rights), all unvested restricted stock awards, all outstanding but unpaid and unvested restricted stock units,
performance awards and other stock based awards then held by the participant will be terminated and
forfeited. Upon termination for a reason, other than death, disability or retirement, which is not also for
“cause” (as defined in the Amended 2019 Plan), all outstanding options and stock appreciation rights then
held by the participant will, to the extent exercisable as of such termination, remain exercisable in full for
a period of three months after such termination (but in no event after the expiration date of any such
option or stock appreciation right). Also, upon such termination all options and stock appreciation rights
that are not exercisable; all unvested restricted stock awards; and all outstanding but unpaid and unvested
restricted stock units, performance awards and other stock based awards then held by the participant will
be terminated and forfeited.

The committee may at any time (including on or after the date of grant or following termination), in
connection with a participant’s termination, cause options or stock appreciation rights held by the
participant to terminate, become or continue to become exercisable and/or remain exercisable, and
restricted stock awards, restricted stock units, performance awards or other stock based awards then held
by the participant to, terminate, vest and/or continue to vest or become free of restrictions and conditions
to payment, as the case may be.

Forfeiture and Recoupment. If a participant is determined by the committee to have taken any action that
would constitute “cause” or an “adverse action” during or within one year after the termination of the
participant’s employment or other service with NTIC or a subsidiary, all rights of the participant under
the Amended 2019 Plan and any agreements evidencing an award then held by the participant will
terminate and be forfeited and the committee may require the participant to surrender and return to us any
shares received, and/or to disgorge any profits or any other economic value made or realized by the

participant in connection with any awards or any shares issued upon the exercise or vesting of any awards
during or within one year after the termination of the participant’s employment or other service.
Additionally, as applicable, we may defer the exercise of any option or stock appreciation right for a
period of up to six months after receipt of a participant’s written notice of exercise or the issuance of
share certificates upon the vesting of any incentive award for a period of up to six months after the date of
such vesting in order for the committee to make any determination as to the existence of cause or an
adverse action.

“Cause,” with respect to any participant, unless otherwise stated in a participant’s employment or other
service agreement, means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of
dishonesty with respect to NTIC or any subsidiary, (b) any unlawful or criminal activity of a serious
nature, (c) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate,
are material in relation to the participant’s overall duties, or (d) any material breach of any employment,
service, confidentiality or non-compete agreement entered into with us or any of our subsidiaries.

An “adverse action” includes any of the following actions or conduct that the committee determines to be
injurious, detrimental, prejudicial or adverse to our interests: (i) disclosing any confidential information of
NTIC or any subsidiary to any person not authorized to receive it; (ii) engaging, directly or indirectly, in
any commercial activity that in the judgment of the committee competes with our business or the business
of any of our subsidiaries; or (iii) interfering with our relationships or the relationships of our subsidiaries
and our and their respective employees, independent contractors, customers, prospective customers and
vendors.

In addition, if we are required to prepare an accounting restatement due to our material noncompliance, as
a result of misconduct, with any financial reporting requirement under the securities laws, then any
participant who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 will reimburse us for the amount of any award received by such individual
under the plan during the 12-month period following the first public issuance or filing with the SEC, as
the case may be, of the financial document embodying such financial reporting requirement. NTIC also
may seek to recover the amount of any incentive award received as required by the provisions of the
Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback, forfeiture or
recoupment provision required by applicable law or under the requirements of any stock exchange or
market upon which our shares of common stock are then listed or traded. In addition, all incentive awards
under the Amended 2019 Plan will be subject to forfeiture or other penalties pursuant to any clawback or
forfeiture policy of NTIC, as in effect from time to time, and such forfeiture and/or penalty conditions or
provisions as determined by the committee. NTIC adopted a clawback policy in August 2018.

Dividend Rights. In the committee’s discretion, certain incentive awards may carry with it a right to
dividend equivalents. Such right would entitle the participant to be credited with an amount equal to all
cash dividends paid on one share of our common stock while the incentive award is outstanding.
Dividend equivalents may be converted into additional restricted stock units or other incentive awards and
may be made subject to the same conditions and restricted as the restricted stock units or other incentive
awards to which they attach. Settlement of dividend equivalents may be made in the form of cash, in the
form of shares of our common stock, or in a combination of both. Dividend equivalents as to restricted
stock units or other incentive awards will be subject to forfeiture and termination to the same extent as the
corresponding restricted stock units as to which the dividend equivalents relate. In no event will
dividends be paid out on unvested awards or provided with performance awards.

Term; Termination; Amendments. Unless terminated earlier, the Amended 2019 Plan will terminate at
midnight on January 17, 2029. Incentive awards outstanding at the time the Amended 2019 Plan is
terminated may continue to be exercised, earned or become free of restriction, according to their terms.

The Board may suspend or terminate the Amended 2019 Plan or any portion of the plan at any time. In
addition to the committee’s authority to amend the Amended 2019 Plan with respect to participants
resident outside of the United States or employed by a non-U.S. subsidiary, the Board may amend the
Amended 2019 Plan from time to time in order that incentive awards under the Amended 2019 Plan will
conform to any change in applicable laws or regulations or in any other respect that the Board may deem
to be in our best interests; provided, however, that no amendments to the Amended 2019 Plan will be
effective without stockholder approval, if it is required under Section 422 of the Code or the Listing Rules
of the Nasdaq Stock Market, or if the amendment seeks to increase the number of shares reserved for
issuance under the Amended 2019 Plan (other than as a result of a permitted adjustment upon certain
corporate events, such as stock splits) or to modify the prohibitions on underwater option re-pricing
discussed above. Termination, suspension or amendment of the Amended 2019 Plan will not adversely
affect any outstanding incentive award without the consent of the affected participant, except for
adjustments in the event of changes in our capitalization or a “change in control” of NTIC.

Transferability. In general, no right or interest in any incentive award may be assigned or transferred by a
participant, except by will or the laws of descent and distribution, or subjected to any lien or otherwise
encumbered. However, a participant is entitled to designate a beneficiary to receive an incentive award
on such participant’s death, and in the event of such participant’s death, payment of any amounts due
under the Amended 2019 Plan will be made to, and exercise of any options or stock appreciation rights
may be made by, such beneficiary. Additionally, upon a participant’s request, the committee may permit
a participant to transfer all or a portion of a non-statutory option, other than for value, to certain of the
participant’s family members or related family trusts, foundations or partnerships. Permitted transferees
of non-statutory options will remain subject to all the terms and conditions of the incentive award
applicable to the participant.

Federal Income Tax Consequences

The following is a general summary, as of the date of this proxy statement, of the federal income tax
consequences to participants and NTIC of transactions under the Amended 2019 Plan. This summary is
intended for the information of stockholders considering how to vote at the Annual Meeting and not as
tax guidance to participants in the Amended 2019 Plan, as the consequences may vary with the types of
grants made, the identity of the participant, and the method of payment or settlement. The summary does
not address the effects of other federal taxes or taxes imposed under state, local, or foreign tax laws.
Participants are encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the Amended 2019 Plan.

Incentive Stock Options. With respect to incentive stock options, generally, the participant is not taxed,
and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock option so
long as the requirements of Section 422 of the Code continue to be met. While no ordinary taxable
income is recognized at exercise (unless there is a “disqualifying disposition,” see below), the excess of
the fair market value of the shares over the option exercise price is a preference item that is recognized for
alternative minimum tax purposes. If the participant meets the employment requirements and does not
dispose of the shares of our common stock acquired upon exercise of an incentive stock option until at
least one year after date of the exercise of the stock option and at least two years after the date the stock
option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or
loss. If the shares of our common stock are disposed of before those periods expire, which is called a
disqualifying disposition, the participant will be required to recognize ordinary income in an amount
equal to the lesser of (i) the excess, if any, of the fair market value of our common stock on the date of
exercise over the exercise price, or (ii) if the disposition is a taxable sale or exchange, the amount of gain
realized. Upon a disqualifying disposition, we will generally be entitled, in the same tax year, to a

deduction equal to the amount of ordinary income recognized by the participant, assuming that a
deduction is allowed under Section 162(m) of the Code.

Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an
incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a
taxable event for the participant. Upon exercise of the stock option, the participant will generally be
required to recognize ordinary income in an amount equal to the excess of the fair market value of our
common stock acquired upon exercise (determined as of the date of exercise) over the exercise price of
the stock option, and we will be entitled to a deduction in an equal amount in the same tax year, assuming
that a deduction is allowed under Section 162(m) of the Code. At the time of a subsequent sale or
disposition of shares obtained upon exercise of a non-statutory stock option, any gain or loss will be a
capital gain or loss, which will be either a long-term or short-term capital gain or loss, depending on how
long the shares have been held.

SARs. The grant of a SAR will not cause the participant to recognize ordinary income or entitle us to a
deduction for federal income tax purposes. Upon the exercise of a SAR, the participant will recognize
ordinary income in the amount of the cash or the value of shares payable to the participant (before
reduction for any withholding taxes), and we will receive a corresponding deduction in an amount equal
to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section
162(m) of the Code.

Restricted Stock Awards, RSUs, and Other Stock-Based Awards. The federal income tax consequences
with respect to restricted stock awards, RSUs, performance awards, and other stock-based awards depend
on the facts and circumstances of each award, including, in particular, the nature of any restrictions
imposed with respect to the awards. In general, if an award of stock granted to the participant is subject
to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the future performance of
substantial services by the participant) and is nontransferable, a taxable event occurs when the risk of
forfeiture ceases or the awards become transferable, whichever first occurs. At such time, the participant
will recognize ordinary income to the extent of the excess of the fair market value of the stock on such
date over the participant’s cost for such stock (if any), and the same amount is deductible by us, assuming
that a deduction is allowed under Section 162(m) of the Code. Under certain circumstances, the
participant, by making an election under Section 83(b) of the Code, can accelerate federal income tax
recognition with respect to an award of stock that is subject to a substantial risk of forfeiture and
transferability restrictions, in which event the ordinary income amount and our deduction will be
measured and timed as of the grant date of the award. If the stock award granted to the participant is not
subject to a substantial risk of forfeiture or transferability restrictions, the participant will recognize
ordinary income with respect to the award to the extent of the excess of the fair market value of the stock
at the time of grant over the participant’s cost, if any, and the same amount is deductible by us, assuming
that a deduction is allowed under Section 162(m) of the Code. If a stock unit award or other stock-based
award is granted but no stock is actually issued to the participant at the time the award is granted, the
participant will recognize ordinary income at the time the participant receives the stock free of any
substantial risk of forfeiture (or receives cash in lieu of such stock) and the amount of such income will be
equal to the fair market value of the stock at such time over the participant’s cost, if any, and the same
amount is then deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code.

Annual Performance Cash Awards and Other Cash-Based Awards. Annual performance cash awards and
other cash-based awards will be taxable as ordinary income to the participant in the amount of the cash
received by the participant (before reduction for any withholding taxes), and we will receive a
corresponding deduction in an amount equal to the ordinary income recognized by the participant,
assuming that a deduction is allowed under Section 162(m) of the Code.

Withholding Obligations. We are entitled to withhold and deduct from future wages of the participant, to
make other arrangements for the collection of, or to require the participant to pay to us an amount
necessary for us to satisfy the participant’s federal, state, or local tax withholding obligations with respect
to awards granted under the Amended 2019 Plan. Withholding for taxes may be calculated based on the
maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a
negative accounting impact on NTIC. The Compensation Committee may permit a participant to satisfy a
tax withholding obligation by withholding shares of common stock underlying an award, tendering
previously acquired shares, delivery of a broker exercise notice, or a combination of these methods.

Code Section 409A. A participant may be subject to a 20% penalty tax, in addition to ordinary income
tax, at the time a grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred
compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not
satisfied.

Code Section 162(m). Pursuant to Section 162(m) of the Code, the annual compensation paid to an
individual who is a “covered employee” is not deductible by us to the extent it exceeds $1 million. The
Tax Cut and Jobs Act, signed into law on December 22, 2017, amended Section 162(m), effective for tax
years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include
any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the
year and the three most highly compensated officers (other than the Chief Executive Officer or the Chief
Financial Officer) who were employed at any time during the year whether or not the compensation is
reported in the Summary Compensation Table included in our proxy statement for our Annual Meeting;
(ii) to treat any individual who is considered a covered employee at any time during a tax year beginning
after December 31, 2016 as remaining a covered employee permanently; and (iii) to eliminate the
performance-based compensation exception to the $1 million deduction limit (with a transition provision
continuing the performance-based exception for certain compensation covered by a written binding
contract in existence on November 2, 2017).

Excise Tax on Parachute Payments. Unless otherwise provided in a separate agreement between a
participant and NTIC, if, with respect to a participant, the acceleration of the vesting of an award or the
payment of cash in exchange for all or part of an award, together with any other payments that such
participant has the right to receive from NTIC, would constitute a “parachute payment,” then the
payments to such participant will be reduced to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however,
will only be made if the aggregate amount of the payments after such reduction exceeds the difference
between the amount of such payments absent such reduction minus the aggregate amount of the excise tax
imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such
provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute
payment” pursuant to Section 4999 of the Code, we will be denied a deduction with respect to such
excess parachute payment pursuant to Section 280G of the Code.

Securities Authorized for Issuance under Equity Compensation Plans

The table under “Securities Authorized for Issuance Under Equity Compensation Plans,” which begins on
page 41, provides information about our common stock that may be issued under our equity
compensation plans as of August 31, 2020.

New Plan Benefits

The New Plan Benefits table is not required since the Amended 2019 Plan does not have set benefits or
amounts and no grants or awards have been made by the Board of Directors subject to stockholder
approval. However, under the policy currently in effect, each non-employee director who is expected to
stand for re-election at the next annual meeting of stockholders will receive a stock option valued at
$50,000 on each September 1st, and our Chairman of the Board of Directors will receive an additional
stock option valued at $10,000.

Board Recommendation

The Board of Directors unanimously recommends that stockholders vote FOR approval of the Northern
Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan.

STOCK OWNERSHIP
________________

Beneficial Ownership of Significant Stockholders and Management

The following table sets forth information known to us with respect to the beneficial ownership of our
common stock as of November 18, 2020, the record date for the Annual Meeting, for:

(cid:120)

(cid:120)
(cid:120)

(cid:120)

each person known by us to beneficially own more than five percent of the outstanding shares
of our common stock;
each of our directors;
each of the executive officers named in the Summary Compensation Table included later in
this proxy statement under “Executive Compensation”; and
all of our current directors and executive officers as a group.

The number of shares beneficially owned by a person includes shares subject to options held by that
person that are currently exercisable or that become exercisable within 60 days of November 18, 2020.
Percentage calculations assume, for each person and group, that all shares that may be acquired by such
person or group pursuant to options currently exercisable or that become exercisable within 60 days of
November 18, 2020 are outstanding for the purpose of computing the percentage of common stock owned
by such person or group. However, such unissued shares of common stock described above are not
deemed to be outstanding for calculating the percentage of common stock owned by any other person.

Except as otherwise indicated, the persons in the table below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable and subject to the information contained in the notes to the table.

Title of Class

Name and Address of Beneficial Owner(1)

Directors and Officers:
Common Stock Nancy E. Calderon
Sarah E. Kemp
Common Stock
Soo-Keong Koh
Common Stock
Common Stock
Sunggyu Lee, Ph.D.
Common Stock G. Patrick Lynch(3)
Common Stock Ramani Narayan, Ph.D.
Common Stock Richard J. Nigon
Common Stock Konstantin von Falkenhausen
Common Stock Matthew C. Wolsfeld
Common Stock All current directors and executive officers as a

Amount and
Nature of
Beneficial
Ownership(2)

Percent of
Class

9,366
8,366
90,615
8,000
1,464,957
96,283
111,341
64,483
273,069

*
*
1.0%
*

15.8%
1.1%
1.2%
*
3.0%

group (9 persons)(4)

2,126,480

21.9%

Significant Beneficial Owners:
Common Stock

Inter Alia Holding Company(5)
23205 Mercantile Road
Beachwood, Ohio 44122

__________________________
* Represents beneficial ownership of less than one percent.

1,203,334

13.2%

(1)

(2)

(3)

(4)

(5)

The business address for each of the directors and officers of NTIC is c/o Northern Technologies
International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014.

Includes for the persons listed below the following shares of common stock subject to options held by such
persons that are currently exercisable or become exercisable within 60 days of November 18, 2020:

Name
Directors
Nancy E. Calderon .........................................................................
Sarah E. Kemp ...............................................................................
Soo-Keong Koh .............................................................................
Sunggyu Lee, Ph.D. .......................................................................
G. Patrick Lynch ...................................................................................
Ramani Narayan, Ph.D..........................................................................
Richard J. Nigon ...................................................................................
Konstantin von Falkenhausen ...............................................................
Named Executive Officers
G. Patrick Lynch ......................................................................................
Matthew C. Wolsfeld ...............................................................................
All current directors and executive officers as a group (9 persons) ........

Shares of Common Stock
Underlying
Stock Options

8,366
8,366
57,283
8,000
187,519
57,283
80,741
63,283

187,519
138,602
609,443

Includes 1,203,334 shares held by Inter Alia Holding Company. See note (5) below.

The amount beneficially owned by all current directors and executive officers as a group includes
1,203,334 shares held of record by Inter Alia Holding Company. See notes (3) above and (5) below.

According to a Schedule 13D/A filed with the SEC on October 22, 2019, Inter Alia Holding Company is an
entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a 47% stockholder.
G. Patrick Lynch shares equal voting and dispositive power over such shares with two other members of
his family. Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio 44122.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes outstanding options and other awards under NTIC’s equity compensation
plans as of August 31, 2020. NTIC’s equity compensation plans as of August 31, 2020 were the Northern
Technologies International Corporation 2019 Stock Incentive Plan, the Northern Technologies
International Corporation Amended and Restated 2007 Stock Incentive Plan, and the Northern
Technologies International Corporation Employee Stock Purchase Plan. Except for automatic annual
grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s directors in
consideration for their services as directors of NTIC and an automatic annual grant of $10,000 in options
to purchase shares of NTIC common stock to NTIC’s Chairman of the Board in consideration for his
services as Chairman, in each case on the first day of each fiscal year, and automatic initial pro rata grants
of $50,000 in options to purchase shares of NTIC common stock to NTIC’s new directors in
consideration for their services as directors of NTIC on the first date of their appointment as directors,
options and other awards granted in the future under the Northern Technologies International Corporation
2019 Stock Incentive Plan are within the discretion of the Board of Directors and the Compensation
Committee of the Board of Directors and, therefore, cannot be ascertained at this time. No future grants of
options or other stock awards will be made under the Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan.

(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

1,127,968(1)(2)

—
1,127,968 (1)(2)

$9.63

—
$9.63

(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column (a))

583,923(3)

—
583,923 (3)

Plan Category
Equity compensation plans
approved by security holders

Equity compensation plans not
approved by security holders

Total
__________________________
(1)

Amount includes 827,198 shares of NTIC common stock issuable upon the exercise of stock options
outstanding as of August 31, 2020 under the Northern Technologies International Corporation Amended
and Restated 2007 Stock Incentive Plan and 300,770 shares of NTIC common stock issuable upon the
exercise of stock options outstanding as of August 31, 2020 under the Northern Technologies International
Corporation 2019 Stock Incentive Plan.

(2)

(3)

Excludes employee stock purchase rights accruing under the Northern Technologies International
Corporation Employee Stock Purchase Plan. Under such plan, each eligible employee may purchase up to
2,000 shares of NTIC common stock at semi-annual intervals on February 28th or 29th (as the case may be)
and August 31st each year at a purchase price per share equal to 90% of the lower of (i) the closing sales
price per share of NTIC common stock on the first day of the offering period or (ii) the closing sales price
per share of NTIC common stock on the last day of the offering period.

Amount includes 499,230 shares available as of August 31, 2020 for future issuance under Northern
Technologies International Corporation 2019 Stock Incentive Plan and 84,693 shares available at August
31, 2020 for future issuance under the Northern Technologies International Corporation Employee Stock
Purchase Plan.

CORPORATE GOVERNANCE
________________

Corporate Governance Guidelines

The Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate
Governance Guidelines can be found on the “Investor Relations—Corporate Governance” section of our
corporate website www.ntic.com. Among the topics addressed in our Corporate Governance Guidelines
are:

(cid:120) Board size, composition and qualifications
(cid:120) Selection of directors
(cid:120) Board leadership
(cid:120) Board committees
(cid:120) Board and committee meetings
(cid:120) Executive sessions of independent directors
(cid:120) Meeting attendance by directors and non-

directors

(cid:120) Appropriate information and access
(cid:120) Ability to retain advisors
(cid:120) Conflicts of interest and director independence
(cid:120) Board interaction with corporate constituencies
(cid:120) Retirement and term limits

(cid:120) Retirement and resignation policy
(cid:120) Change of principal occupation and board

memberships

(cid:120) Board compensation
(cid:120) Stock ownership by directors and executive

officers

(cid:120) Loans to directors and executive officers
(cid:120) CEO evaluation
(cid:120) Board and committee evaluation
(cid:120) Director continuing education
(cid:120) Succession planning
(cid:120) Related person transactions
(cid:120) Communications with directors

Board Leadership Structure

Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive
Officer may or may not be held by one person. The Board of Directors believes it is best not to have a
fixed policy on this issue and that it should be free to make this determination based on what it believes is
best under the circumstances. However, the Board of Directors strongly endorses the concept of an
independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at
any time the Chief Executive Officer and Chairman of the Board positions are held by the same person,
the Board of Directors will elect an independent director as a lead independent director.

G. Patrick Lynch currently serves as our President and Chief Executive Officer, and Richard J. Nigon
serves as our non-executive Chairman of the Board. Because the Chief Executive Officer and Chairman
of the Board positions currently are not held by the same person, we do not have a lead independent
director. We currently believe this leadership structure is in the best interests of NTIC and our
stockholders and strikes the appropriate balance between the Chief Executive Officer’s responsibility for
the strategic direction, day-to-day-leadership and performance of NTIC and the Chairman’s responsibility
to provide oversight of NTIC’s corporate governance and guidance to our Chief Executive Officer and to
set the agenda for and preside over Board of Directors meetings.

At each regular Board of Directors meeting, our independent directors meet in executive session with no
company management present during a portion of the meeting. After each such executive session, our
Chairman of the Board provides our Chief Executive Officer with any actionable feedback from our
independent directors.

Director Independence

The Board of Directors has affirmatively determined that six of NTIC’s current eight directors are
“independent directors” under the Listing Rules of the Nasdaq Stock Market: Nancy E. Calderon, Sarah
E. Kemp, Soo-Keong Koh, Sunggyu Lee, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen.

The Board of Directors additionally made the affirmative determination that Barbara D. Colwell, who did
not stand for re-election at our 2020 Annual Meeting of Stockholders held on January 17, 2020, was an
“independent director” under the Listing Rules of the Nasdaq Stock Market.

In making these affirmative determinations that such individuals are “independent directors,” the Board of
Directors reviewed and discussed information provided by the directors and by NTIC with regard to each
director’s business and personal activities as they may relate to NTIC and NTIC’s management.

Board Meetings and Attendance

The Board of Directors met four times during the fiscal year ended August 31, 2020. Each of the
directors attended at least 75% of the aggregate of the total number of meetings of the Board and the total
number of meetings held by all Board committees on which the director served.

Board Committees

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee, each of which has the composition and responsibilities described
below. The Board of Directors, from time to time, may establish other committees to facilitate the
management of NTIC and may change the composition and responsibilities of our existing committees.
Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee operates under a written charter adopted by the Board of Directors, which can be found on the
“Investor Relations—Corporate Governance” section of our corporate website www.ntic.com.

The following table summarizes the current membership of each of our three Board committees.

Director
Nancy E. Calderon
Sarah E. Kemp
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen

Audit Committee

Audit
√
—
—
—
—
—
Chair
√

Compensation
—
—
—
√
—
—
√
Chair

Nominating and
Corporate Governance
—
Chair
√
—
—
—
√
—

Responsibilities. The Audit Committee provides assistance to the Board of Directors in fulfilling its
responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices,
systems of internal accounting and financial controls, the annual independent audit of our financial
statements, and the legal compliance and ethics programs of NTIC as established by management. The
Audit Committee’s primary responsibilities include:

(cid:120) Overseeing our financial reporting process, internal control over financial reporting and

disclosure controls and procedures on behalf of the Board of Directors;

(cid:120) Having sole authority to appoint, retain and oversee the work of our independent registered

public accounting firm and establish the compensation to be paid to the firm;

(cid:120) Reviewing and pre-approving all audit services and permissible non-audit services to be

provided to NTIC by our independent registered public accounting firm;

(cid:120) Establishing procedures for the receipt, retention and treatment of complaints regarding
accounting, internal accounting controls or auditing matters and for the confidential,
anonymous submission by our employees of concerns regarding questionable accounting or
auditing matters; and

(cid:120) Overseeing the establishment and administration of (including the grant of any waiver from)
a written code of ethics applicable to our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing similar functions.

The Audit Committee has the authority to engage the services of outside experts and advisors as it deems
necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Audit Committee are Ms. Calderon, Mr. Nigon and Mr. von
Falkenhausen. Mr. Nigon is the chair of the Audit Committee. Ms. Colwell, who did not stand for re-
election at our 2020 Annual Meeting of Stockholders held on January 17, 2020, served on the Audit
Committee prior to such date.

Each member of the Audit Committee who served during fiscal 2020 is considered “independent” for
purposes of membership on audit committees pursuant to the Listing Rules of the Nasdaq Stock Market
and the rules and regulations of the SEC and is “financially literate” as required by the Listing Rules of
the Nasdaq Stock Market. In addition, the Board of Directors has determined that Ms. Calderon and
Mr. Nigon qualify as “audit committee financial experts” as defined by the rules and regulations of the
SEC and meet the qualifications of “financial sophistication” under the Listing Rules of the Nasdaq Stock
Market as a result of their extensive financial backgrounds and various financial positions they have held
throughout their respective careers. Stockholders should understand that these designations related to our
Audit Committee members’ experience and understanding with respect to certain accounting and auditing
matters do not impose upon any of them any duties, obligations or liabilities that are greater than those
generally imposed on a member of the Audit Committee or of the Board of Directors.

Meetings. The Audit Committee met four times during fiscal 2020 and once in executive session with
Baker Tilly, our independent registered public accounting firm.

Audit Committee Report. This report is furnished by the Audit Committee of the Board of Directors with
respect to NTIC’s financial statements for the fiscal year ended August 31, 2020.

One of the purposes of the Audit Committee is to oversee NTIC’s accounting and financial reporting
processes and the audit of NTIC’s annual financial statements. NTIC’s management is responsible for the
preparation and presentation of complete and accurate financial statements. NTIC’s independent
registered public accounting firm, Baker Tilly US, LLP, is responsible for performing an independent
audit of NTIC’s financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and for issuing a report on their audit.

In performing its oversight role, the Audit Committee has reviewed and discussed NTIC’s audited
financial statements for the fiscal year ended August 31, 2020 with NTIC’s management. Management
represented to the Audit Committee that NTIC’s financial statements were prepared in accordance with
generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly US, LLP,
NTIC’s independent registered public accounting firm, the matters required to be discussed under Public
Company Accounting Oversight Board standards. The Audit Committee has received the written
disclosures and the letter from Baker Tilly US, LLP required by applicable requirements of the Public
Company Accounting Oversight Board regarding Baker Tilly US, LLP’s communications with the Audit
Committee concerning independence. The Audit Committee has discussed with Baker Tilly US, LLP its
independence and concluded that the independent registered public accounting firm is independent from
NTIC and NTIC’s management.

Based on the review and discussions of the Audit Committee described above, in reliance on the
unqualified opinion of Baker Tilly US, LLP regarding NTIC’s audited financial statements, and subject to
the limitations on the role and responsibilities of the Audit Committee discussed above and in the Audit
Committee’s charter, the Audit Committee recommended to the Board of Directors that NTIC’s audited
financial statements for the fiscal year ended August 31, 2020 be included in its Annual Report on Form
10-K for the fiscal year ended August 31, 2020 for filing with the Securities and Exchange Commission.

This report is dated as of November 6, 2020.

Audit Committee

Richard J. Nigon, Chair
Nancy E. Calderon
Konstantin von Falkenhausen

Other Information. Additional information regarding the Audit Committee and our independent
registered public accounting firm is disclosed under the “Proposal Three—Ratification of Selection of
Independent Registered Public Accounting Firm” section of this proxy statement.

Compensation Committee

Responsibilities. The Compensation Committee provides assistance to the Board of Directors in fulfilling
its oversight responsibility relating to compensation of our Chief Executive Officer and other executive
officers and administers our equity compensation plans. The Compensation Committee’s primary
responsibilities include:

(cid:120)

recommending to the Board of Directors for its determination the annual salaries, incentive
compensation, long-term compensation and any and all other compensation applicable to our
executive officers;

establishing and, from time to time, reviewing and revising corporate goals and objectives
with respect to compensation for our executive officers and establishing and leading a process
for the full Board of Directors to evaluate the performance of our executive officers in light
of those goals and objectives;

administering our equity compensation plans and recommending to the Board of Directors for
its determination grants of options or other equity-based awards for executive officers,
employees and independent consultants under our equity compensation plans;

(cid:120)

reviewing our policies with respect to employee benefit plans; and

establishing and, from time to time, reviewing and revising processes and procedures for the
consideration and determination of executive compensation.

The Compensation Committee has the authority to engage the services of outside experts and advisors as
it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so,
assesses the independence of such experts and advisors from management.

Composition. The current members of the Compensation Committee are Dr. Lee, Mr. Nigon and Mr. von
Falkenhausen. Mr. von Falkenhausen is the current Chair of the Compensation Committee.

The Board of Directors has determined that each of the members of the Compensation Committee who
served during fiscal 2020 is considered an “independent director” under the Listing Rules of the Nasdaq
Stock Market, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and
otherwise independent under the rules and regulations of the SEC.

Processes and Procedures for Consideration and Determination of Executive Compensation. As
described in more detail above under “—Responsibilities,” the Board of Directors has delegated to the
Compensation Committee the responsibility, among other things, to recommend to the Board of Directors
any and all compensation payable to our executive officers, including annual salaries, incentive
compensation and long-term incentive compensation, and to administer our equity and incentive
compensation plans applicable to our executive officers. Decisions regarding executive compensation
made by the Compensation Committee are not considered final and are subject to final review and
approval by the entire Board of Directors. Under the terms of its formal written charter, the
Compensation Committee has the power and authority, to the extent permitted by our Bylaws and
applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the
Compensation Committee. The Compensation Committee has not generally delegated any of its duties
and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

Our President and Chief Executive Officer and our Chief Financial Officer assist the Compensation
Committee in gathering compensation related data regarding our executive officers and making
recommendations to the Compensation Committee regarding the form and amount of compensation to be
paid to each executive officer. In making final recommendations to the Board of Directors regarding
compensation to be paid to our executive officers, the Compensation Committee considers the
recommendations of our President and Chief Executive Officer and our Chief Financial Officer, but also
considers other factors, such as its own views as to the form and amount of compensation to be paid, the
achievement by NTIC of pre-established performance objectives, the general performance of NTIC and
the individual officers, the performance of NTIC’s stock price and other factors that may be relevant.
Neither management nor the Compensation Committee engaged a compensation consultant.

Final deliberations and decisions by the Compensation Committee regarding its recommendations to the
Board of Directors of the form and amount of compensation to be paid to our executive officers are made
by the Compensation Committee, without the presence of any executive officer of NTIC. In making final
decisions regarding compensation to be paid to our executive officers, the Board of Directors considers
the same factors and gives considerable weight to the recommendations of the Compensation Committee.

Meetings. The Compensation Committee met two times during fiscal 2020.

Nominating and Corporate Governance Committee

Responsibilities. The primary responsibilities of the Nominating and Corporate Governance Committee
include:

(cid:120)

identifying individuals qualified to become members of the Board of Directors;

recommending director nominees for each annual meeting of our stockholders and director
nominees to fill any vacancies that may occur between meetings of stockholders;

(cid:120) being aware of best practices in corporate governance matters;

(cid:120) developing and overseeing an annual Board of Directors and Board committee evaluation

process; and

(cid:120)

establishing and leading a process for determination of the compensation applicable to the
non-employee directors on the Board.

The Nominating and Corporate Governance Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Nominating and Corporate Governance Committee are
Ms. Kemp, Mr. Koh and Mr. Nigon. Ms. Kemp is the chair of the Nominating and Corporate
Governance Committee. Mr. Koh served as chair of the Nominating and Corporate Governance
Committee during fiscal 2020 and until November 2020. Ms. Colwell, who did not stand for re-election at
our 2020 Annual Meeting of Stockholders held on January 17, 2020, served on the Nominating and
Corporate Governance Committee prior to such date.

The Board of Directors has determined that each of the members of the Nominating and Corporate
Governance Committee who served during fiscal 2020 is considered an “independent director” under the
Listing Rules of the Nasdaq Stock Market.

Processes and Procedures for Consideration and Determination of Director Compensation. As
mentioned above under “—Responsibilities,” the Board of Directors has delegated to the Nominating and
Corporate Governance Committee the responsibility, among other things, to review and make
recommendations to the Board of Directors concerning compensation for non-employee members of the
Board of Directors, including but not limited to retainers, meeting fees, committee chair and member
retainers and equity compensation. Decisions regarding director compensation made by the Nominating
and Corporate Governance Committee are not considered final and are subject to final review and
approval by the entire Board of Directors. Under the terms of its formal written charter, the Nominating
and Corporate Governance Committee has the power and authority, to the extent permitted by our Bylaws
and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee has not generally delegated any of its duties and responsibilities to subcommittees, but rather
has taken such actions as a committee, as a whole.

In making recommendations to the Board of Directors regarding compensation to be paid to our non-
employee directors, the Nominating and Corporate Governance Committee considers fees and other
compensation paid to directors of comparable public companies, the number of board and committee
meetings that our directors are expected to attend, and other factors that may be relevant. In making final

decisions regarding non-employee director compensation, the Board of Directors considers the same
factors and the recommendation of the Nominating and Corporate Governance Committee.

Meetings. The Nominating and Corporate Governance Committee met two times during fiscal 2020.

Director Nominations Process

Pursuant to a Director Nominations Process adopted by the Board of Directors, in selecting nominees for
the Board of Directors, the Nominating and Corporate Governance Committee first determines whether
the incumbent directors are qualified to serve, and wish to continue to serve, on the Board. The
Nominating and Corporate Governance Committee believes that NTIC and its stockholders benefit from
the continued service of qualified incumbent directors because those directors have familiarity with and
insight into NTIC’s affairs that they have accumulated during their tenure with NTIC. Appropriate
continuity of Board membership also contributes to the Board’s ability to work as a collective body.
Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-
nominate an incumbent director if the director wishes to continue his or her service with the Board, the
director continues to satisfy the criteria for membership on the Board that the Nominating and Corporate
Governance Committee generally views as relevant and considers in deciding whether to re-nominate an
incumbent director or nominate a new director, the Nominating and Corporate Governance Committee
believes the director continues to make important contributions to the Board, and there are no special,
countervailing considerations against re-nomination of the director.

Pursuant to a Director Nominations Process adopted by the Board of Directors, in identifying and
evaluating new candidates for election to the Board, the Nominating and Corporate Governance
Committee solicits recommendations for nominees from persons whom the Nominating and Corporate
Governance Committee believes are likely to be familiar with qualified candidates having the
qualifications, skills and characteristics required for Board nominees from time to time. Such persons
may include members of the Board of Directors and our senior management and advisors to NTIC. In
addition, from time to time, if appropriate, the Nominating and Corporate Governance Committee may
engage a search firm to assist it in identifying and evaluating qualified candidates.

The Nominating and Corporate Governance Committee reviews and evaluates each candidate whom it
believes merits serious consideration, taking into account available information concerning the candidate,
any qualifications or criteria for Board membership established by the Nominating and Corporate
Governance Committee, the existing composition of the Board, and other factors that it deems relevant.
In conducting its review and evaluation, the Nominating and Corporate Governance Committee solicits
the views of our management, other Board members, and other individuals it believes may have insight
into a candidate. The Nominating and Corporate Governance Committee may designate one or more of
its members and/or other Board members to interview any proposed candidate.

The Nominating and Corporate Governance Committee will consider recommendations for the
nomination of directors submitted by our stockholders. For more information, see the information set
forth under “Stockholder Proposals and Director Nominations for the 2022 Annual Meeting of
Stockholders ─ Director Nominations for 2022 Annual Meeting.” The Nominating and Corporate
Governance Committee will evaluate candidates recommended by stockholders in the same manner as
those recommended as stated above.

There are no formal requirements or minimum qualifications that a candidate must meet in order for the
Nominating and Corporate Governance Committee to recommend the candidate to the Board. The
Nominating and Corporate Governance Committee believes that each nominee should be evaluated based
on his or her merits as an individual, taking into account the needs of NTIC and the Board of Directors.

However, in evaluating candidates, there are a number of criteria that the Nominating and Corporate
Governance Committee generally views as relevant and is likely to consider. Some of these factors
include whether the candidate is an “independent director” under the Listing Rules of the Nasdaq Stock
Market and meets any other applicable independence tests under the federal securities laws and rules and
regulations of the SEC; whether the candidate is “financially literate” and otherwise meets the
requirements for serving as a member of an audit committee under the Listing Rules of the Nasdaq Stock
Market; whether the candidate is “financially sophisticated” under the Listing Rules of the Nasdaq Stock
Market and an “audit committee financial expert” under the federal securities laws and the rules and
regulations of the SEC; the needs of NTIC with respect to the particular talents and experience of its
directors; the personal and professional integrity and reputation of the candidate; the candidate’s level of
education and business experience; the candidate’s broad-based business acumen; the candidate’s level of
understanding of our business and its industry; the candidate’s ability and willingness to devote adequate
time to the work of the Board of Directors and its committees; the fit of the candidate’s skills and
personality with those of other directors and potential directors in building a board that is effective,
collegial and responsive to the needs of NTIC; whether the candidate possesses strategic thinking and a
willingness to share ideas; the candidate’s diversity of experiences, expertise, background and other
attributes; and the candidate’s ability to represent the interests of all stockholders and not a particular
interest group.

While we do not have a formal stand-alone diversity policy in considering whether to recommend any
director nominee, including candidates recommended by stockholders, and the Board of Directors has not
adopted a formal definition of diversity, the Board’s diversity is a consideration in the director nomination
process. As discussed above, the Nominating and Corporate Governance Committee considers the factors
described above, including the candidate’s diversity of experiences, expertise, background and other
attributes. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity
of experience, expertise, backgrounds and other attributes. The Nominating and Corporate Governance
Committee does not assign specific weights to particular criteria and no particular criterion is necessarily
applicable to all prospective nominees. The Board of Directors believes that the backgrounds and
qualifications of directors, considered as a group, should provide a significant mix of experience,
knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.

For this year’s election, the Board of Directors has nominated eight individuals. All are incumbent
nominees who collectively bring tremendous diversity to the Board. Each nominee is a strategic thinker
and has varying, specialized experience in the areas relevant to NTIC and its businesses. Moreover, their
collective experience covers a wide range of geographies and industries, and roles in academia, corporate
governance and government. The eight director nominees range in age from 53 to 72; two of the eight
director nominees are women; three are of Asian descent; one is a citizen of Singapore; one is a citizen of
the Republic of Korea and one is a citizen of Germany.

Board Oversight of Risk

The Board of Directors as a whole has responsibility for risk oversight, with more in-depth reviews of
certain areas of risk being conducted by the relevant Board committees that report on their deliberations
to the full Board of Directors. The oversight responsibility of the Board and its committees is enabled by
management reporting processes that are designed to provide information to the Board about the
identification, assessment and management of critical risks and management’s risk mitigation strategies.
The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax),
legal, compensation, competitive, health, safety, environmental, economic, political and reputational
risks.

The standing committees of the Board of Directors oversee risks associated with their respective principal
areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of
financial reporting, on our processes for the management of business and financial risk, our financial
reporting obligations and for compliance with significant applicable legal, ethical and regulatory
requirements. The Audit Committee, along with management, is also responsible for developing and
participating in a process for review of important financial and operating topics that present potential
significant risk to NTIC. The Compensation Committee is responsible for overseeing risks and exposures
associated with our executive compensation programs and arrangements and management succession
planning. The Nominating and Corporate Governance Committee oversees risks relating to our corporate
governance matters, director compensation programs and director succession planning.

We recognize that a fundamental part of risk management is understanding not only the risks a company
faces and what steps management is taking to manage those risks, but also understanding what level of
risk is appropriate for NTIC. The involvement of the full Board of Directors each year in establishing our
key corporate business strategies and annual fiscal budget is a key part of the Board of Directors’
assessment of management’s appetite for risk and also a determination of what constitutes an appropriate
level of risk for NTIC.

We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight
for NTIC for a number of reasons, including: (1) general risk oversight by the full Board of Directors in
connection with its role in reviewing our key business strategies and monitoring on an on-going basis the
implementation of our key business strategies; (2) more detailed oversight by our standing Board
committees that are currently comprised of and chaired by our independent directors, and (3) the focus of
our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding the
implementation of our key business strategies and specifically risk management.

Code of Ethics

The Board of Directors has adopted a Code of Ethics, which applies to all of our directors, executive
officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and
meets the requirements of the SEC and the Nasdaq Stock Market. A copy of our Code of Ethics is
available on the “Investor Relations—Corporate Governance” section of our corporate website
www.ntic.com.

Policy Regarding Director Attendance at Annual Meetings of Stockholders

Although a regular Board of Directors meeting is generally held on the day of each annual meeting of
stockholders, this meeting is typically held by telephone. It is the policy of the Board of Directors that if
a regular in-person Board of Directors meeting occurs on the day of the annual meeting of stockholders,
directors standing for re-election should attend the annual meeting of stockholders, if their schedules
permit. Since a telephonic Board meeting was held on the day of last year’s annual meeting of
stockholders, the only directors who attended the meeting were Mr. Nigon and Mr. Lynch.

Complaint Procedures

The Audit Committee has established procedures for the receipt, retention and treatment of complaints
received by NTIC regarding accounting, internal accounting controls or auditing matters, and the
submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable
accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their
concerns with our outside legal counsel, who in turn will be responsible for informing the Audit
Committee.

Process Regarding Stockholder Communications with Board of Directors

Stockholders may communicate with the Board of Directors or any one particular director by sending
correspondence, addressed to NTIC’s Corporate Secretary, Northern Technologies International
Corporation, 4201 Woodland Road, Circle Pines, MN 55014 with an instruction to forward the
communication to the Board of Directors or one or more particular directors. NTIC’s Corporate Secretary
will promptly forward all such stockholder communications to the Board of Directors or the one or more
particular directors, with the exception of any advertisements, solicitations for periodical or other
subscriptions and other similar communications.

Summary of Cash and Other Compensation

DIRECTOR COMPENSATION
________________

The table below provides summary information concerning the compensation of each individual who
served as a director of NTIC during the fiscal year ended August 31, 2020, other than G. Patrick Lynch,
our President and Chief Executive Officer, who was not compensated separately for serving on the Board
of Directors during fiscal 2020. His compensation during fiscal 2020 for serving as an executive officer
of NTIC is set forth under “Executive Compensation” included elsewhere in this proxy statement.

DIRECTOR COMPENSATION – FISCAL 2020

Name
Nancy E. Calderon ....................... $
Barbara D. Colwell ......................
Sarah E. Kemp .............................
Soo-Keong Koh ...........................
Sunggyu Lee, Ph.D. .....................
Ramani Narayan, Ph.D. ...............
Richard J. Nigon ..........................
Konstantin von Falkenhausen ......
__________________________
(1)

Fees Earned or
Paid in Cash ($)

Option
Awards ($)(1)(2)

36,125 $
19,250
32,375
34,000
32,000
29,000
62,500
43,500

41,663
0
41,663
50,000
0
50,000
60,002
50,000

All Other

Compensation ($)(3) Total ($)
$

— $
—
—
—
—
144,000
—
—

77,788
19,250
74,038
84,000
32,000
223,000
122,502
93,500

The amounts in this column do not reflect compensation actually received by the directors nor do they
reflect the actual value that will be recognized by the directors. Instead, the amounts reflect the grant date
fair value for option grants made by us in fiscal 2020, as calculated in accordance with FASB ASC Topic
718.

On September 1, 2019, each then current director, other than Ms. Colwell, Dr. Lee and Mr. Lynch, received
a stock option to purchase 11,737 shares of our common stock at an exercise price of $10.80 per share
granted under the Northern Technologies International Corporation 2019 Stock Incentive Plan, the material
terms of which are described in more detail under “Executive Compensation—Stock Incentive Plans.”
These options vested in full on September 1, 2020 and will expire on August 31, 2029 or earlier in the case
of a director whose service as a director is terminated prior to such date. In addition, on September 1,
2019, Mr. Nigon received an additional stock option to purchase 2,348 shares of our common stock in
consideration for his service as Chairman of the Board. The terms of this stock option are identical to the
other director stock options granted on that date. See “—Non-Employee Director Compensation
Program—Stock Options.” The grant date fair value associated with these awards and as calculated in
accordance with FASB ASC Topic 718 is determined based on our Black-Scholes option pricing model.
The grant date fair value per share for the options granted on September 1, 2019 was $4.26 and was
determined using the following specific assumptions: risk free interest rate: 1.40%; expected life:
10.0 years; expected volatility: 45.2%; and expected dividend yield: 0%.

On October 22, 2019, Ms. Calderon and Ms. Kemp received stock options to purchase 8,366 shares of our
common stock at an exercise price of $12.09 per share granted under the Northern Technologies
International Corporation 2019 Stock Incentive Plan. These options vested in full on October 22, 2020 and
will expire on October 21, 2029 or earlier in the case of a director whose service as a director is terminated
prior to such date. The grant date fair value associated with these awards and as calculated in accordance
with FASB ASC Topic 718 is determined based on our Black-Scholes option pricing model. The grant
date fair value per share for the options granted on October 22, 2019 was $4.98 and was determined using
the following specific assumptions: risk free interest rate: 1.57%; expected life: 10.0 years; expected
volatility: 45.5%; and expected dividend yield: 0%.

(2)

The table below provides information regarding the aggregate number of options to purchase shares of our
common stock outstanding at August 31, 2020 and held by each of the directors listed in the Director
Compensation Table. Note that because of the grant date, neither the Director Compensation Table nor the
table below reflect option grants on September 1, 2020. See “—Non-Employee Director Compensation
Program—Stock Options.” Share and per share data have been adjusted to reflect our two-for-one stock
split that was effective June 28, 2019.

Name
Nancy E. Calderon...................
Barbara D. Colwell ..................
Sarah E. Kemp .........................
Soo-Keong Koh .......................
Sunggyu Lee, Ph.D. .................
Ramani Narayan, Ph.D. ...........
Richard J. Nigon ......................
Konstantin von Falkenhausen ..

Aggregate Number
Of Securities
Underlying Options

8,366
—
8,366
57,283
8,000
57,283
80,741
63,283

Exercisable/
Unexercisable
0/8,366
—
0/8,366
45,546/11,737
8,000/0
45,546/11,737
66,656/14,085
51,546/11,737

Exercise
Price(s)

$ 12.09
—
$12.09
$ 6.70 – 18.23
$7.35
$ 6.70 – 18.23
$ 6.70 – 18.23
$5.125 – 18.23

Expiration
Date(s)

10/21/2029
—
10/21/2029
08/31/2023 – 8/31/2029
8/31/2023
08/31/2023 – 8/31/2029
08/31/2023 – 8/31/2029
11/15/2022 – 8/31/2029

(3)

We do not provide perquisites or other personal benefits to our directors. The amounts reflected for
Dr. Narayan reflects consulting fees paid during the fiscal year ended August 31, 2020 as described in more
detail below under “—Consulting Agreement.”

Non-Employee Director Compensation Program

Overview. Our non-employee directors for purposes of our director compensation program currently
consist of Nancy E. Calderon, Sarah E. Kemp, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan,
Ph.D., Richard J. Nigon and Konstantin von Falkenhausen. Our non-employee directors for fiscal 2020
were Nancy E. Calderon, Barbara D. Colwell, Sarah E. Kemp, Soo-Keong Koh, Sunggyu Lee, Ph.D.,
Ramani Narayan, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen. Nancy E. Calderon and
Sarah E. Kemp joined the Board of Directors in October 2019. Barbara D. Colwell did not stand for re-
election at our 2020 Annual Meeting of Stockholders held on January 17, 2020.

We use a combination of cash and long-term equity-based incentive compensation in the form of annual
stock option grants to attract and retain qualified candidates to serve on the Board of Directors. In setting
non-employee director compensation, we follow the processes and procedures described under
“Corporate Governance—Nominating and Corporate Governance Committee—Processes and
Procedures for the Determination of Director Compensation.”

Cash Retainers and Meeting Fees. Each of our non-employee directors receives annual cash retainers and
meeting fees. The following table sets forth the annual cash retainers paid to our non-employee directors
during fiscal 2020:

Description
Non-employee Board Member ....................................................................................
Chairman of the Board ................................................................................................
Audit Committee Chair ...............................................................................................
Audit Committee Member (including Chair) ..............................................................
Compensation Committee Chair .................................................................................
Compensation Committee (including Chair) ..............................................................
Nominating and Corporate Governance Committee Chair .........................................
Nominating and Corporate Governance Committee (including Chair) .......................

Annual Cash
Retainer
25,000
15,000
5,000
4,500
4,000
3,000
2,000
3,000

Each of our non-employee directors also receives $1,000 for each Board, Board committee and strategy
review meeting attended. No director, however, earns more than $1,000 per day in Board, Board
committee and strategy review meeting fees.

Stock Options. Pursuant to our non-employee director compensation program, each non-employee
director who is expected to stand for re-election at the next annual meeting of stockholders, is
automatically granted a ten-year non-qualified option to purchase $50,000 in shares of our common stock
on the first day of each fiscal year in consideration for his or her service as a director of NTIC, and the
Chairman of the Board is automatically granted an additional ten-year non-qualified option to purchase
$10,000 in shares of our common stock on the first day of each fiscal year in consideration for his or her
services as Chairman. In addition, each new non-employee director is automatically granted a ten-year
non-qualified option to purchase a pro rata portion of $50,000 shares of our common stock calculated by
dividing the number of months remaining in the fiscal year at the time of election or appointment by
12 on the date the director is first elected or appointed as a director of NTIC. The number of shares of
common stock underlying the options is determined based on the grant date fair value of the options.
Each option becomes exercisable in full on the one-year anniversary of the grant date. The exercise price
of such options is equal to the fair market value of a share of our common stock on the grant date.

Each non-employee director of NTIC as of the first day of fiscal 2020, September 1, 2019, received a
stock option award pursuant to this program, with the exception of Dr. Lee, who has rejected option
grants to directors in connection with his services as a director of NTIC since 2014, and Ms. Colwell, who
did not stand for re-election at our 2020 Annual Meeting of Stockholders held on January 17, 2020. Each
of Ms. Calderon and Ms. Kemp received options to purchase 8,366 shares of our common stock on
October 22, 2019 as a result of her initial election to the Board of Directors on such date. More recently,
each current non-employee director of NTIC as of the first day of fiscal 2021, September 1, 2020,
received a stock option award pursuant to this program, with the exception of Dr. Lee. These stock
options will vest in full on the first anniversary of the grant date.

Under the terms of our stock incentive plan, unless otherwise provided in a separate agreement or
modified in connection with the termination of a director’s service, if a director’s service with NTIC
terminates for any reason, the unvested portion of options then held by the director will immediately
terminate and the director’s right to exercise the then vested portion will:

(cid:120)

immediately terminate if the director’s service relationship with NTIC terminated for
“cause”;
continue for a period of 12 months if the director’s service relationship with NTIC terminates
as a result of the director’s death, disability or retirement; or
continue for a period of three months if the director’s service relationship with NTIC
terminates for any reason, other than for cause or upon the director’s death, disability or
retirement.

We refer you to note (1) to the “Director Compensation Table” for a summary of all option grants to our
non-employee directors during the fiscal year ended August 31, 2020 and note (2) to the “Director
Compensation Table” for a summary of all options to purchase shares of our common stock held by our
non-employee directors as of August 31, 2020.

Reimbursement of Expenses. All of our directors are reimbursed for travel expenses for attending
meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board of Directors
functions.

Consulting Agreement

NTIC, Bioplastic Polymers LLC and Dr. Narayan are parties to a consulting agreement pursuant to which
Dr. Narayan provides certain consulting services to us relating to our Natur-Tec® business and bioplastics
program. The consulting agreement sets out terms for clear separation between Dr. Narayan’s work at
Michigan State University and any related inventions and his work with us and related inventions. In
exchange for the consulting services, we pay Dr. Narayan $12,000 per month. The term of the consulting
agreement is five years, and unless earlier terminated by the parties, will terminate on January 11, 2022.
Either party may terminate the consulting agreement earlier upon 30 days prior written notice. The
consulting agreement will terminate automatically upon the death of Dr. Narayan or in the event of his
disability that prevents him from performing the consulting services under the agreement. We paid
consulting fees to Bioplastic Polymers LLC, which is owned by Ramani Narayan, Ph.D., in the aggregate
amount of $144,000 during the fiscal year ended August 31, 2020.

EXECUTIVE COMPENSATION
________________

Compensation Review

In this Compensation Review, we describe the key principles and approaches we use to determine
elements of compensation paid to, awarded to and earned by G. Patrick Lynch, who serves as our
President and Chief Executive Officer (referred to as our “CEO”), and Matthew C. Wolsfeld, who serves
as our Chief Financial Officer (referred to as our “CFO”). Their compensation is set forth in the
Summary Compensation Table found later in this proxy statement. The CEO and CFO are the only two
individuals who have been designated by our Board of Directors as “executive officers” of NTIC within
the meaning of the federal securities laws. This Compensation Review should be read in conjunction
with the accompanying compensation tables, corresponding notes and narrative discussion, as they
provide additional information and context to our compensation disclosures. We refer to the CEO and
CFO in this proxy statement as our “named executive officers” or “executives.”

When reading this Compensation Review, please note that we are a “smaller reporting company” under
the federal securities laws and are not required to provide a “Compensation Discussion and Analysis” of
the type required by Item 402 of Regulation S-K. This Compensation Review is intended to supplement
the SEC-required disclosure, which is included below this section, and it is not a Compensation
Discussion and Analysis.

Executive Summary

One of our key executive compensation objectives is to link pay to performance by aligning the financial
interests of our executives with those of our stockholders and by emphasizing pay for performance in our
compensation programs. We believe we accomplish this objective primarily through our annual bonus
plan, which compensates executives for achieving annual corporate financial goals and individual goals.

Our fiscal 2020 total net sales decreased 14.5% to $47,638,691 compared to fiscal 2019 and NTIC
incurred a net loss attributable to NTIC of $(1,362,709), or $(0.15) per diluted common share, for fiscal
2020 compared to net income attributable to NTIC of $5,209,622, or $0.55 per diluted common share.

Total compensation for our named executive officers for fiscal 2020 increased approximately 1.5%
compared to fiscal 2019, primarily as a result of increased stock option grants, which were made in partial
payment for their anticipated bonuses under our annual bonus plan.

Compensation Highlights and Best Practices

Our compensation practices include many best pay practices that support our executive compensation
objectives and principles and benefit our stockholders, such as the following:

(cid:120) Pay for performance. We tie compensation directly to financial performance. Our annual
bonus plan pays out only if a certain minimum adjusted earnings threshold is met, and the
payouts are completely dependent upon our actual adjusted earnings.

(cid:120) At-risk pay. A significant portion of executives’ compensation is “performance-based” or “at
risk.” For fiscal 2020, 40% of total compensation for our named executive officers was
performance-based, assuming grant date fair values for equity awards.

(cid:120) Equity-based pay. A significant portion of executives’ compensation is “equity-based” and in
the form of stock-based incentive awards. For fiscal 2020, 33% of total compensation for our
named executive officers was equity-based, assuming grant date fair values for equity
awards.

(cid:120) Clawback policy. Our stock incentive plan and related award agreements include a

“clawback” mechanism to recoup incentive compensation if it is determined that executives
engaged in certain conduct adverse to our interests. In addition, in August 2018, we adopted
a clawback policy pursuant to which we may recover certain incentive compensation from
current or former executive officers in the event a financial metric used to determine the
vesting or payment of incentive compensation to an executive was calculated incorrectly or
the executive engaged in egregious conduct that is substantially detrimental to NTIC.

(cid:120) No tax gross-ups. We do not provide any tax “gross-up” payments in connection with any

compensation, benefits or perquisites provided to our executives.

(cid:120) Limited perquisites. We provide only limited perquisites to our executives.

(cid:120) No hedging or pledging. We prohibit our executives from engaging in hedging transactions,
such as short sales, transactions in publicly traded options, such as puts, calls and other
derivatives, and pledging our common stock in any significant respect.

Say-on-Pay Vote

At our 2020 Annual Meeting of Stockholders, our stockholders had the opportunity to provide an
advisory vote on the compensation paid to our named executive officers, or a “say-on-pay” vote. Of the
votes cast by our stockholders, over 99% were in favor of our “say-on-pay” proposal. Accordingly, the
Compensation Committee generally believes that these results affirmed stockholder support of our
approach to executive compensation and did not believe it was necessary to make, and therefore has not
made, any changes to our executive pay program solely in response to that vote. In accordance with the
result of the advisory vote on the frequency of the say-on-pay vote, which was conducted at our 2020
Annual Meeting of Stockholders, our Board of Directors has determined that we will conduct an
executive compensation advisory vote every year. Accordingly, the next say-on-pay vote will occur at
our 2022 Annual Meeting of Stockholders. Our next vote on the frequency of the say-on-pay vote will
occur at our 2026 Annual Meeting of Stockholders.

Executive Compensation Objectives

Our guiding compensation philosophy is to maintain an executive compensation program that allows us
to attract, retain, motivate and reward qualified and talented executives that will enable us to grow our
business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.

The following core principles provide a framework for our executive compensation program:

(cid:120) Align interests of our executives with stockholder interests;

(cid:120)

Integrate compensation with our business plans and strategic goals;

(cid:120) Link amount of compensation to both company and individual performance; and

(cid:120) Provide fair and competitive compensation opportunities that attract and retain executives.

How We Make Compensation Decisions

There are several elements to our executive compensation decision-making, which we believe allow us to
most effectively implement our compensation philosophy. Each of these elements and their roles are
described briefly below.

Role of the Compensation Committee. The Compensation Committee, which is comprised solely of
independent directors, oversees our executive compensation program. Within its duties, the
Compensation Committee recommends compensation for the CEO and CFO. In doing so, the
Compensation Committee:

(cid:120) Approves and recommends that the Board approve the total executive compensation package
for each executive, including his base salary, annual bonus payout and annual stock option
awards;

(cid:120) Approves and recommends that the Board approve the terms of our annual bonus plan;

(cid:120) Approves and recommends that the Board approve annual stock option grants;

(cid:120) Evaluates market competitiveness of our executive compensation program; and

(cid:120) Evaluates proposed significant changes to all other elements of our executive compensation

program.

In setting or recommending executive compensation for our executives, the Compensation Committee
considers the following primary factors:

(cid:120)

each executive’s position within NTIC and the level of responsibility;

the ability of the executive to impact key business initiatives;

the executive’s individual experience and qualifications;

company performance, as compared to specific pre-established objectives;

individual performance, generally and as compared to specific pre-established objectives;

the executive’s current and historical compensation levels;

advancement potential and succession planning considerations;

an assessment of the risk that the executive would leave NTIC and the harm to our business
initiatives if the executive left;

the retention value of executive equity holdings, including outstanding stock options;

the dilutive effect on the interests of our stockholders of long-term equity-based incentive
awards; and

anticipated share-based compensation expense as determined under applicable accounting
rules.

The Compensation Committee also considers the recommendations of the CEO with respect to executive
compensation to be paid to other executives and employees. The significance of any individual factor
described above in setting executive compensation will vary from year to year and may vary among our
executives. In making its final decision regarding the form and amount of compensation to be paid to our
named executive officers (other than the CEO), the Compensation Committee considers and gives great

weight to the recommendations of the CEO recognizing that due to his reporting and otherwise close
relationship with each executive and employee, the CEO often is in a better position than the
Compensation Committee to evaluate the performance of each executive (other than himself). In making
its final decision regarding the form and amount of compensation to be paid to the CEO, the
Compensation Committee considers the results of the CEO’s self-review and his individual annual
performance review by the Compensation Committee and the recommendations of our non-employee
directors. The CEO’s compensation is approved by the Board of Directors (with the CEO abstaining),
upon recommendation of the Compensation Committee.

Role of Management. Management’s role is to provide current compensation information to the
Compensation Committee and provide analysis and recommendations on executive compensation to the
Compensation Committee based on the executive’s level of professional experience; the executive’s
duties and responsibilities; individual performance; tenure; and historic corporate performance. None of
our executives, including the CEO, provides input or recommendations with respect to his own
compensation.

Use of Market Data. Since there are no public companies of which NTIC is aware that are substantially
similar to NTIC, in terms of its business, industry and corporate profile, the Compensation Committee has
not used market data to review and evaluate executive compensation in any material respect. However,
the Compensation Committee has historically used a group of peer companies with a market
capitalization similar to NTIC and either in a similar industry or located in Minnesota.

Elements of Our Executive Compensation Program

Our executive compensation program for the fiscal year ended August 31, 2020 consisted of the following
key elements:

(cid:120) Base salary;
(cid:120) Annual incentive compensation;
(cid:120) Long-term equity-based incentive compensation, in the form of stock options; and
(cid:120) All other compensation, including health and welfare benefits, retirement plans and

perquisites.

The table below provides some of the key characteristics of and purpose for each element along with
some key actions taken during fiscal 2020.

Element
Base Salary A fixed amount, paid in cash

Key Characteristics

and reviewed annually and,
if appropriate, adjusted.

Annual
Incentive

A variable, short-term
element of compensation that
is typically payable in cash
and is based on Adjusted
EBITOI and individual
performance goals.

Purpose

Provide a source of fixed income
that is competitive and reflects
scope and responsibility of the
position held.
Motivate and reward our executives
for achievement of annual business
results intended to drive overall
company performance.

Key Fiscal 2020 Actions
Our named executive officers
received 1.5% increases to their
fiscal 2019 annual base salaries.

Messrs. Lynch and Wolsfeld
received bonuses in the amount
of $56,026 and $41,410,
respectively, in each case
representing 13% of their annual
base salary. A portion of the
annual incentive earned for fiscal
2020 was paid in the form of a
stock option grant made at the
beginning of fiscal 2020.

Element
Long-Term
Equity-
Based
Incentive

Key Characteristics
A variable, long-term element
of compensation that is
provided in the form of stock
options. Stock options are
time-based and vest annually
over three years. Prior options
granted on the one-year
anniversary of the grant date.

Purpose
Align the interests of our executives
with the long-term interests of our
stockholders; promote stock
ownership and create significant
incentives for executive retention.

Key Fiscal 2020 Actions

In response to stockholder
concerns, stock options now vest
annually over three years instead
of vesting in full on the one year
anniversary of the grant date.

A portion of the fiscal 2020 stock
option grant was intended as
partial payout of the fiscal 2020
annual bonus program.

Health and
Welfare
Benefits

Retirement
Plans

Perquisites

Includes health, dental and
life insurance.

Provide competitive health and
welfare benefits at a reasonable cost
and promote employee health.

No significant changes were
made.

Includes a 401(k) plan.
We do not provide pension
arrangements or post-
retirement health coverage for
our executives or employees.
We also do not provide any
nonqualified defined
contribution or other deferred
compensation plans.

Includes use of a company-
owned automobile. We do
not provide any other
perquisites to our executives.

Provide an opportunity for
employees to save and prepare
financially for retirement.

No significant changes were
made.

Assist in the attraction and retention
of executives.

No significant changes were
made.

We describe each key element of our executive compensation program in more detail in the following
pages, along with the compensation decisions made in fiscal 2020.

Base Salary. We provide a base salary for our named executive officers, which, unlike some of the other
elements of our executive compensation program, is not subject to company or individual performance
risk. We recognize the need for most executives to receive at least a portion of their total compensation in
the form of a guaranteed base salary that is paid in cash regularly throughout the year.

We initially fix base salaries for our executives at a level that we believe enables us to hire and retain
them in a competitive environment and to reward satisfactory individual performance and a satisfactory
level of contribution to our overall business objectives. The Compensation Committee reviews base
salaries for our named executive officers each year typically in August and generally recommends to the
Board of Directors any increases for the following fiscal year in August. Any increases in base salaries
are effective as of September 1.

The Compensation Committee’s recommendations to the Board of Directors regarding the base salaries of
our named executive officers are based on a number of factors, including: the executive’s level of
responsibility, prior experience and base salary for the prior year, the skills and experiences required by
the position, length of service with NTIC, past individual performance, cost of living increases and other
considerations the Compensation Committee deems relevant. The Compensation Committee also
recognizes that in addition to the typical responsibilities and duties held by our executives, by virtue of
their positions, our executives, due to the small number of our executives and employees, often possess

additional responsibilities and perform additional duties that would be typically delegated to others in
most organizations with additional personnel and resources.

Annualized base salary rates for fiscal 2019 and fiscal 2020 for our named executive officers were as
follows:

Name
G. Patrick Lynch ......................
Matthew C. Wolsfeld ................

Fiscal
2019

$ 428,958
317,056

Fiscal
2020

$ 435,393
321,812

% Change From
Fiscal 2019
1.5%
1.5%

An increase of 1.5% was determined appropriate in light of the increased responsibilities taken on by our
executives and performance during fiscal 2019. The Board of Directors, upon recommendation of the
Compensation Committee, recently set base salaries for fiscal 2021. Both Mr. Lynch’s and Mr.
Wolsfeld’s base salaries for fiscal 2021 will remain the same as their respective base salaries for fiscal
2020.

Annual Incentive Compensation. In addition to base compensation, we provide our named executive
officers the opportunity to earn annual incentive compensation based on the achievement of certain
company and individual related performance goals. Our annual bonus program directly aligns the
interests of our executive officers and stockholders by providing an incentive for the achievement of key
corporate and individual performance measures that are critical to the success of NTIC and linking a
significant portion of each executive’s annual compensation to the achievement of such measures.

Under the annual bonus plan for fiscal 2020, the total amount available under the bonus plan for all plan
participants, including our two executive officers, as in past years, was a percent (25%) of NTIC’s
earnings before interest, taxes and other income, as adjusted to take into account amounts to be paid under
the bonus plan and certain other adjustments (referred to as “Adjusted EBITOI”). For fiscal 2020, the
other adjustments included amounts paid under NTIC’s sales and management bonus plan and profit
sharing plan and a portion of stock-based compensation expense. Also for fiscal 2020, the Board of
Directors, upon recommendation of the Compensation Committee, approved an upward adjustment to the
overall bonus pool to reflect superior performance on behalf of the management team in light of impacts
to the business from the COVID-19 pandemic. As in past years, for fiscal 2020, for each named
executive officer participant, 75% of the amount of their individual bonus payout was determined based
upon their individual allocation percentage of the total amount available under the bonus plan, and 25%
of their individual payout was determined based upon their achievement of certain pre-established but
more qualitative individual performance objectives.

A plan participant’s individual allocation percentage of the total amount available under the bonus plan
was based on the number of plan participants (which for fiscal 2020 was nine participants), the
individual’s annual base salary for fiscal 2020 and the individual’s position and level of responsibility
within NTIC. Individual allocation percentages ranged from approximately 1% to 22%. Mr. Lynch’s
individual allocation percentage for fiscal 2020 was 22% and Mr. Wolsfeld’s individual allocation
percentage for fiscal 2020 was 16% of a total management bonus pool of approximately $250,000.

Mr. Lynch’s individual performance objectives for fiscal 2020 related primarily to NTIC’s operations in
China and other subsidiaries, management of pending litigation, improvement and maintenance of key
joint venture relationships, improvement and maintenance of investors relations and retention and
improvement of key personnel. Mr. Wolsfeld’s individual performance objectives for fiscal 2020 related
primarily to investor relations, implementation of cost control measures, financial oversight of NTIC’s
subsidiary in China, and management of NTIC’s Human Resources department. In the case of both

Mr. Lynch and Mr. Wolsfeld, the Compensation Committee determined each executive achieved his
individual performance objectives at a 100% achievement level.

Mr. Lynch received a total cash bonus of $56,026 for fiscal 2020 and Mr. Wolsfeld received a total bonus
of $41,410 for fiscal 2020. Additionally, a portion of the annual bonus earned was paid in the form of a
stock option grant on September 1, 2019.

The structure and material terms of our annual bonus plan for fiscal 2021 are similar to the annual bonus
plan for fiscal 2020. As in past years, the payment of bonuses under the plan for fiscal 2021 will be
discretionary and may be paid to participants in cash and/or shares of NTIC common stock.

Long-Term Equity-Based Incentive Compensation. The long-term equity-based incentive compensation
component of our executive compensation program consists of annual option grants to our executives and
certain other employees. The stock options are typically granted on the first business day of each fiscal
year.

Accordingly, on September 1, 2019, NTIC granted Mr. Lynch an option to purchase 58,651 shares of
common stock and Mr. Wolsfeld an option to purchase 43,351 shares of common stock. These options
vested in full on the first anniversary of the grant date. More recently, on September 1, 2020, NTIC
granted Mr. Lynch an option to purchase 74,742 shares of common stock and Mr. Wolsfeld an option to
purchase 55,244 shares of common stock. In response to stockholder concerns, these stock options vest
annually over three years, as opposed to vesting in full on the first anniversary of the date of grant.

In determining the number of stock options to grant to our executives and other employees, the Board of
Directors, upon recommendation of the Compensation Committee, considered the anticipated amount to
be earned under the annual bonus plan and a portion of which it preferred to pay out in the form of a stock
option grant and the total amount of stock-based compensation expense budgeted for such options and
divided that amount by the grant date fair value per share to obtain a total option pool. Of the total option
pool, the number of options to be granted to each executive and employee receiving options was then
determined based on the individual’s base salary as a percentage of the total aggregate base salaries of all
executive and employees receiving option grants.

The Compensation Committee’s primary objectives with respect to long-term equity-based incentive
compensation are to align the interests of our executives with the long-term interests of our stockholders,
promote stock ownership and create significant incentives for executive retention. Long-term equity-
based incentives are intended to comprise a significant portion of each executive’s compensation package,
consistent with our executive compensation objective to align the interests of our executives with the
interests of our stockholders. For fiscal 2020, equity-based compensation comprised over 33% of the
total compensation for Mr. Lynch and Mr. Wolsfeld, assuming grant date fair value for equity awards. All
equity-based compensation granted to our executives and other employees is granted under our then
current stockholder-approved stock incentive plan.

The Compensation Committee uses stock options as opposed to other equity-based incentive awards since
the Compensation Committee believes that options effectively incentivize executives to maximize
company performance, as the value of awards is directly tied to an appreciation in the value of our
common stock. Stock options also provide an effective retention mechanism because of vesting
provisions. An important objective of our long-term equity-based incentive program is to strengthen the
relationship between the long-term value of our common stock and the potential financial gain for our
executives. Stock options provide recipients with the opportunity to purchase our common stock at a
price fixed on the grant date regardless of future market price. The vesting of our stock options is time-
based – over three years and previously upon the one-year anniversary of the date of grant. Our policy is

to grant options only with an exercise price equal to or more than the fair market value of our common
stock on the grant date. Under the terms of our incentive plan, fair market value is defined as the mean
between the reported high and low sale prices of our common stock as of the grant date at the end of the
regular trading session, as reported on the Nasdaq Global Market. Because stock options become
valuable only if the share price increases above the exercise price and the option holder remains employed
during the period required for the option to vest, they provide an incentive for an executive to remain
employed. In addition, stock options link a portion of an employee’s compensation to the interests of our
stockholders by providing an incentive to achieve corporate goals and increase the market price of our
common stock over the vesting period.

Although we do not have any stock retention or ownership guidelines, the Board of Directors encourages
our executives to have a financial stake in NTIC in order to align the interests of our executives with the
interests of our stockholders. Through the grant of stock options, we seek to align the long-term interests
of our executives with the long-term interests of our stockholders by creating a strong and direct link
between compensation and long-term stockholder return. When our executives deliver returns to our
stockholders, in the form of increases in our stock price or otherwise, stock options permit an increase in
their compensation. We also believe that stock options enable our executives to achieve a meaningful
equity ownership in NTIC and enable us to attract, retain and motivate our executives by maintaining
competitive levels of total compensation. As described in more detail below, under the terms of our
insider trading policy, our executives are prohibited from engaging in any hedging or significant pledging
of their shares of our common stock.

All Other Compensation. It is generally our policy not to extend significant perquisites to our executives
that are not available to our employees generally. The only significant perquisite that we provide to our
executives is the personal use of a company-owned vehicle. Our executives also receive benefits, which
are also received by our other employees, including participation in the Northern Technologies
International Corporation 401(k) Plan and health, dental and life insurance benefits. Under the 401(k)
plan, all eligible participants, including our executives, may voluntarily request that we reduce his or her
pre-tax compensation by up to 10% (subject to certain special limitations) and contribute such amounts to
a trust. We typically contribute an amount equal to 50% of the first 7% of the amount that each
participant contributed under this plan. We do not provide pension arrangements or post-retirement
health coverage for our executives or employees. We also do not provide any nonqualified defined
contribution or other deferred compensation plans.

Change in Control and Post-Termination Severance Arrangements

Change in Control Arrangements. To encourage continuity, stability and retention when considering the
potential disruptive impact of an actual or potential corporate transaction, we have established change in
control arrangements, including provisions in our stock incentive plans and written employment
agreements with our executives. These arrangements are designed to incentivize our executives to remain
with NTIC in the event of a change in control or potential change in control.

Under the terms of our stock incentive plans and the individual award documents provided to recipients of
awards under those plans, all stock options become immediately vested and exercisable upon the
completion of a change in control of NTIC. For more information, see “—Potential Payments Upon
Termination or Change in Control—Change in Control Arrangements.” Thus, the immediate vesting of
stock options is triggered by the change in control, itself, and thus is known as a “single trigger” change
in control arrangement. We believe these “single trigger” equity acceleration change in control
arrangements provide important retention incentives during what can often be an uncertain time for
executives. They also provide executives with additional monetary motivation to focus on and complete a
transaction that the Board of Directors believes is in the best interests of our stockholders rather than to

seek new employment opportunities. If an executive were to leave before the completion of the change in
control, non-vested options held by the executive would terminate.

In addition, we have entered into employment agreements with our named executive officers to provide
certain payments and benefits in the event of a change in control, which are payable only in the event
their employment is terminated in connection with the change in control (“double-trigger” provisions).
These change in control protections provide consideration to executives for certain restrictive covenants
that apply following termination of employment and provide continuity of management in connection
with a threatened or actual change in control transaction. If an executive’s employment is terminated
without “cause” or by the executive for “good reason” (as defined in the employment agreements) within
24 months following a change in control, the executive will be entitled to receive a lump sum payment
equal to two times, in the case of the CEO, and one and one-half times, in the case of the CFO, his
average total annual compensation for the two most recently completed fiscal years. The average total
annual compensation will be determined based on the calculation used to determine total compensation in
the Summary Compensation Table. Accordingly, it will not include equity gains; only, the grant date fair
value of equity grants. Additionally, each of the CEO and CFO is eligible to receive a pro rata portion of
the target bonus that the executive otherwise would have been eligible to receive under our bonus plan for
the fiscal year during which the executive’s employment is terminated, with such pro rata portion based
on the number of completed months during the fiscal year that the executive was employed with NTIC.
These arrangements, and a quantification of the payment and benefits provided under these arrangements,
are described in more detail under “—Potential Payments Upon Termination or Change in Control—
Change in Control Arrangements.” Other than the immediate acceleration of equity-based awards, which
we believe aligns our executives’ interests with those of our stockholders by allowing executives to
participate fully in the benefits of a change in control as to all of their equity, in order for a named
executive officer to receive any other payments or benefits as a result of a change in control of NTIC,
there must be a termination of the executive’s employment, either by us without cause or by the executive
for good reason. The termination of the executive’s employment by the executive without good reason
will not give rise to additional payments or benefits either in a change in control situation or otherwise.
Thus, these additional payments and benefits will not just be triggered by a change in control, but also
will require a termination event not within the control of the executive, and thus are known as “double
trigger” change in control arrangements. As opposed to the immediate acceleration of stock options, we
believe that other change in control payments and benefits should properly be tied to termination
following a change in control, given the intent that these amounts provide economic security to ease the
executive’s transition into new employment.

We believe these change in control arrangements are an important part of our executive compensation
program in part because they mitigate some of the risk for executives working in a smaller company
where there is a meaningful risk that NTIC may be acquired. Change in control benefits are intended to
attract and retain qualified executives who, absent these arrangements and in anticipation of a possible
change in control of NTIC, might consider seeking employment alternatives to be less risky than
remaining with NTIC through the transaction. We believe that relative to NTIC’s overall value, our
potential change in control benefits are relatively small. We also believe that the form and amount of
these change in control benefits are fair and reasonable to both NTIC and our executives. The
Compensation Committee reviews our change of control arrangements periodically to ensure that they
remain necessary and appropriate.

Other Severance Arrangements. Each of our named executive officers is entitled to receive severance
benefits upon certain other qualifying terminations of employment, other than a change in control,
pursuant to the provisions of such executive’s employment agreement. These severance arrangements are
primarily intended to retain our executives and provide consideration to those executives for certain
restrictive covenants that apply following termination of employment. Additionally, we entered into the

employment agreements because they provide us valuable protection by subjecting the executives to
restrictive covenants that prohibit the disclosure of confidential information during and following their
employment and limit their ability to engage in competition with us or otherwise interfere with our
business relationships following their termination of employment. For more information on our
employment agreements and severance arrangements with our named executive officers, see the
discussions below under “—Summary Compensation—Employment Agreements” and “—Potential
Payments Upon a Termination or Change in Control.”

We believe that the form and amount of these severance benefits are fair and reasonable to both NTIC and
our executives. The Compensation Committee reviews our severance arrangements periodically to ensure
that they remain necessary and appropriate.

Hedging and Pledging Policies

Our insider trading policy prohibits NTIC directors, officers, employees, consultants and their immediate
family members, other household members and controlled entities from engaging in hedging or
monetization transactions that hedge or offset, or are designed to hedge or offset, any decrease in the
market value of NTIC securities, including, without limitation, prepaid variable forward contracts, equity
swaps, collars and exchange funds. In addition, our insider trading policy limits the ability of the
individuals listed above to pledge NTIC securities. NTIC securities may only be pledged in an
insignificant manner if the individual has a compelling reason for the pledge and is able to demonstrate
the financial capacity to repay the loan without resort to the pledged securities. The proposed transaction
must be submitted at least two weeks prior to its proposed execution in order for the Chief Financial
Officer to review and approve the transaction.

Clawback Policy

In August 2018, we adopted a clawback policy pursuant to which we may recover certain incentive
compensation from current or former executive officers in the event a financial metric used to determine
the vesting or payment of incentive compensation to an executive was calculated incorrectly or the
executive engaged in egregious conduct that is substantially detrimental to NTIC.

Summary of Cash and Other Compensation

The table below provides summary information concerning all compensation awarded to, earned by or
paid to named executive officers. G. Patrick Lynch, our President and Chief Executive Officer, serves as
our principal executive officer, and Matthew C. Wolsfeld, our Chief Financial Officer and Corporate
Secretary, serves as our principal financial officer. Mr. Lynch and Mr. Wolsfeld are the only two
individuals who have been designated by our Board of Directors as “executive officers” of NTIC.

SUMMARY COMPENSATION TABLE – FISCAL 2020

Name and Principal
Position
G. Patrick Lynch ...............
President and Chief
Executive Officer

Fiscal
Year
2020
2019

Matthew C. Wolsfeld ........
Chief Financial Officer
and Corporate Secretary
__________________________

2020
2019

Salary
$ 435,392
428,958

Option
Awards(1)
$ 249,854
248,776

Non-Equity
Incentive Plan
Compensation(2)
$

56,026
182,342

All Other
Compensation(3)
$

13,102
13,102

Total
$ 754,374
873,178

321,811
317,056

184,675
183,878

41,410
134,775

12,875
12,875

560,771
648,584

(1)

(2)

On September 1, 2019, each of the named executive officers was granted a stock option under the Northern
Technologies International Corporation 2019 Stock Incentive Plan. We refer you to the information under
the heading “Compensation Review—Elements of Our Executive Compensation Program—Long-Term
Equity-Based Incentive Compensation” for a discussion of the option grants and their terms. The amounts
reflected in the column entitled “Option Awards” for each officer represent the aggregate grant date fair
value for the option awards, as computed in accordance with FASB ASC Topic 718. The grant date fair
value is determined based on a Black-Scholes option pricing model. The grant date fair value per share for
the options granted on September 1, 2019 was $4.26 and was determined using the following specific
assumptions: risk free interest rate: 1.40%; expected life: 10.0 years; expected volatility: 45.2%; and
expected dividend yield: 0%.

The amounts reflected in the column entitled “Non-Equity Incentive Plan Compensation” reflect the cash
amount of bonus earned by each of the officers in consideration for their fiscal 2020 and 2019 performance,
respectively, but paid to such officers during fiscal 2021 and 2020, respectively. We refer you to the
information under “Compensation Review—Elements of Our Executive Compensation Program—Annual
Incentive Compensation” for a discussion of the factors taken into consideration by the Board of Directors,
upon recommendation of the Compensation Committee, in determining the amount of bonus paid to each
named executive officer.

(3)

The amounts shown in the column entitled “All Other Compensation” for fiscal 2020 include the following
with respect to each named executive officer:

Name
G. Patrick Lynch ............................................. $ 8,750
Matthew C. Wolsfeld ...................................... 8,750

401(k) Match

Personal Use
of Auto
$ 4,352
4,125

Outstanding Equity Awards at Fiscal Year End

The table set forth below provides information regarding stock options for each of our named executive
officers that remained outstanding at August 31, 2020. Note that because of the grant date, the table set
forth below does not reflect option grants on September 1, 2020. We did not have any equity incentive
plan awards or stock awards outstanding at August 31, 2020. Share and per share data have been adjusted
to reflect our two-for-one stock split that was effective June 28, 2019.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL 2020

Name
G. Patrick Lynch ....................

Number of Securities
Underlying Unexercised
Options (#)
Exercisable
6,724
13,450
16,650
11,610
10,488
14,574
16,072
7,803
27,596
0

Option Awards
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable(1)
0
0
0
0
0
0
0
3,901(2)
0

58,651(3)

Option
Exercise
Price ($)
$ 5.125
5.125
5.125
7.35
10.05
7.43
6.70
9.18
18.23
10.80

Option
Expiration Date
11/15/2022
11/15/2022
11/15/2022
08/31/2023
08/31/2024
08/31/2025
08/31/2026
08/31/2027
08/31/2028
08/31/2029

Name
Matthew C. Wolsfeld .............

Number of Securities
Underlying Unexercised
Options (#)
Exercisable
4,970
9,942
12,306
8,582
7,752
10,772
11,880
5,767
20,396
0

Option Awards
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable(1)
0
0
0
0
0
0
0
2,883(2)
0

43,351(3)

Option
Exercise
Price ($)
5.125
5.125
5.125
7.35
10.05
7.43
6.70
9.18
18.23
10.80

Option
Expiration Date
11/15/2022
11/15/2022
11/15/2022
08/31/2023
08/31/2024
08/31/2025
08/31/2026
08/31/2027
08/31/2028
08/31/2029

__________________________
(1)

All options described in this table were granted under the Northern Technologies International Corporation
2019 Stock Incentive Plan or the Northern Technologies International Corporation Amended and Restated
2007 Stock Incentive Plan. Under these plans, upon the occurrence of a change in control, the unvested
and unexercisable options will be accelerated and become fully vested and immediately exercisable as of
the date of the change in control. For more information, we refer you to the discussion below under “—
Stock Incentive Plans.”

(2)

These options vested over a three-year period, with one-third of the underlying shares vesting on each of
September 1, 2018, 2019 and 2020 so long as the individual remains an employee of NTIC as of such date.

(3)

These options vested on September 1, 2020, the one-year anniversary of the grant date.

Stock Incentive Plans

We have two stock incentive plans under which stock options are currently outstanding: the Northern
Technologies International Corporation 2019 Stock Incentive Plan and the Northern Technologies
International Corporation Amended and Restated 2007 Stock Incentive Plan. However, future stock
incentive awards may only be granted under the Northern Technologies International Corporation 2019
Stock Incentive Plan. Under the terms of the 2019 plan, our named executive officers, in addition to other
employees and individuals, are eligible to receive stock-based compensation awards, such as stock
options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and
other stock-based awards. To date, only incentive and non-statutory stock options have been granted
under the plan. The plan contains both an overall limit on the number of shares of our common stock that
may be issued, as well as individual limits for non-employee directors and other grant limits.

Incentive stock options must be granted with a per share exercise price equal to at least the fair market
value of a share of our common stock on the date of grant. For purposes of the plan, the fair market value
of our common stock is the mean between the reported high and low sale price of our common stock, as
reported by the Nasdaq Global Market. We generally set the per share exercise price of all stock options
granted under the plan at an amount equal to the fair market value of a share of our common stock on the
date of grant.

Except in connection with certain specified changes in our corporate structure or shares, the Board of
Directors or Compensation Committee may not, without prior approval of our stockholders, seek to effect
any re-pricing of any previously granted, “underwater” option or stock appreciation right by amending or
modifying the terms of the underwater option or stock appreciation right to lower the exercise price,
cancelling the underwater option or stock appreciation right in exchange for cash, replacement options or
stock appreciation rights having a lower exercise price, or other incentive awards, or repurchasing the

underwater options or stock appreciation rights and granting new incentive awards under the plan. For
purposes of the plan, an option or stock appreciation right is deemed to be “underwater” at any time when
the fair market value of our common stock is less than the exercise price.

We generally provide for the vesting of stock options in equal annual installments over a three-year
period commencing on the one-year anniversary of the date of grant for employees and in full on the one-
year anniversary of the date of grant for directors. We generally provide for option terms of ten years.

Optionees may pay the exercise price of stock options in cash, except that the Compensation Committee
may allow payment to be made (in whole or in part) by (1) using a broker-assisted cashless exercise
procedure pursuant to which the optionee, upon exercise of an option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares of our common stock or loan a sufficient amount of money to
pay all or a portion of the exercise price of the option and/or any related withholding tax obligations and
remit such sums to us and directs us to deliver stock certificates to be issued upon such exercise directly
to such broker or dealer; or (2) using a cashless exercise procedure pursuant to which the optionee
surrenders to us shares of our common stock either underlying the option or that are otherwise held by the
optionee.

Under the terms of the plan, unless otherwise provided in a separate agreement or amended in connection
with an optionee’s termination of employment, if a named executive officer’s employment or service with
NTIC terminates for any reason, the unvested portion of the options held by such officer will immediately
terminate, and the executive’s right to exercise the then vested portion of the options will:

(cid:120)

immediately terminate if the executive’s employment or service relationship with NTIC
terminates for “cause”;
continue for a period of 12 months if the executive’s employment or service relationship with
NTIC terminates as a result of the executive’s death, disability or retirement; or
continue for a period of three months if the executive’s employment or service relationship
with NTIC terminates for any reason, other than for cause or upon death, disability or
retirement.

As set forth in the plan, the term “cause” is as defined in any employment or other agreement or policy
applicable to the named executive officer or, if no such agreement or policy exists, means (i) dishonesty,
fraud, misrepresentation, embezzlement or other act of dishonesty with respect to us or any subsidiary,
(ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a
duty or duties that, individually or in the aggregate, are material in relation to the overall duties, or
(iv) any material breach of any employment, service, confidentiality or non-compete agreement entered
into with us or any subsidiary.

Under the terms of the plan, if a participant is determined by the committee to have taken any action that
would constitute “cause” or an “adverse action” during or within one year after the termination of the
participant’s employment or other service with NTIC, all rights of the participant under the plan and any
incentive award agreements then held by the participant will terminate and be forfeited without notice of
any kind, and the committee may rescind the exercise, vesting or issuance of, or payment in respect of,
any incentive awards of the participant that were exercised, vested or issued, or as to which such payment
was made, and require the participant to pay any amount received or the amount of any gain realized as a
result of such rescinded exercise, vesting, issuance or payment. Additionally, as applicable, we may defer
the exercise of any option or stock appreciation right for a period of up to six months after receipt of a
participant’s written notice of exercise or the issuance of share certificates upon the vesting of any
incentive award for a period of up to six months after the date of such vesting in order for the committee
to make any determination as to the existence of cause or an adverse action. An “adverse action” includes

any of the following actions or conduct that the committee determines to be injurious, detrimental,
prejudicial or adverse to our interests: (i) disclosing any confidential information of NTIC or any
subsidiary to any person not authorized to receive it; (ii) engaging, directly or indirectly, in any
commercial activity that in the judgment of the committee competes with our business or the business of
any of our subsidiaries; or (iii) interfering with our relationships or the relationships of our subsidiaries
and our and their respective employees, independent contractors, customers, prospective customers and
vendors.

As described in more detail under “—Post-Termination Severance and Change in Control Arrangements”
if there is a change in control of NTIC, then, under the terms of agreements evidencing options granted to
our named executive officers and other employees under the plan, all outstanding options will become
immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of
whether the executive to whom such options have been granted remains in the employ or service of us or
any of our subsidiaries.

Post-Termination Severance and Change in Control Arrangements

We have entered into employment agreements with G. Patrick Lynch, NTIC’s President and Chief
Executive Officer, and Matthew C. Wolsfeld, NTIC’s Chief Financial Officer and Corporate Secretary.
Although each executive’s employment with NTIC remains “at will,” the employment agreements
provide each executive with certain severance benefits in the event the executive’s employment is
terminated by us without “cause” or by the executive for “good reason” and the executive executes and
does not revoke a separation agreement and a release of all claims.

If an executive’s employment is terminated by us without “cause” or by the executive for “good reason,”
in addition to any accrued but unpaid salary and benefits through the date of termination, the executive
will be entitled to a severance cash payment from us in an amount equal to two times (one and one-half
times, in the case of Mr. Wolsfeld) the executive’s average total annual compensation for the two most
recently completed fiscal years. The average total annual compensation will be determined based on the
calculation used to determine total compensation in the Summary Compensation Table. Accordingly, it
will not include equity gains; only, the grant date fair value of equity grants. Additionally, the CEO and
CFO are eligible to receive a pro rata portion of the target bonus that the executive otherwise would have
been eligible to receive under our bonus plan for the fiscal year during which the executive’s employment
is terminated, with such pro rata portion based on the number of complete months during the fiscal year
that the executive was employed with NTIC. The severance payment will be paid in several installments
in the form of salary continuation in accordance with our normal payroll practices over a 24-month period
(18-month period, in the case of Mr. Wolsfeld). If, however, the termination event occurs within
24 months after a change in control of NTIC, the severance payment will be paid in one lump sum. If the
executive is eligible for and timely elects continued coverage under our group medical plan, group dental
plan and/or group vision plan pursuant to Section 4980B of the Internal Revenue Code of 1986, as
amended (referred to as “COBRA”), for each of the first 18 months of the COBRA continuation period,
we also will reimburse the executive in an amount equal to the difference between the amount the
executive pays for such COBRA continuation coverage each month and the amount paid by a full-time
active employee each month for the same level of coverage elected by the executive. In addition, all
outstanding and unvested options to purchase shares of our common stock and other stock incentive
awards granted to the executive under our stock incentive plan will become immediately vested and
exercisable.

Under the employment agreements, “cause” is defined as (i) the executive’s material breach of any of the
executive’s obligations under the employment agreement or the executive’s willful and continued failure
or refusal to perform his duties, responsibilities and obligations as an executive officer of NTIC, for

reasons other than the executive’s disability, to the satisfaction of the Board of Directors; (ii) the
executive’s commission of an act of dishonesty, fraud, embezzlement, misappropriation, or intentional
and deliberate injury or material breach of fiduciary duty, or material breach of the duty of loyalty related
to or against us or our business, or any unlawful or criminal activity of a serious nature involving any
felony, or conviction by a court of competent jurisdiction of, or pleading guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or (iii) the existence of any court order or settlement
agreement prohibiting the executive’s continued employment with NTIC.

“Good reason” is defined as (i) a material diminution in the executive’s authority, duties or
responsibilities; (ii) a material diminution in the executive’s annual base salary; (iii) a material change in
the geographic location at which we require the executive to provide services, except for travel reasonably
required in the performance of the executive’s responsibilities; or (iv) any action or inaction that
constitutes a material breach by us of the employment agreement.

“Change in control” has the meaning assigned to such term in our stock incentive plan as in effect from
time to time to the extent such change in control is a “change of control event” as defined under Code
Section 409A and applicable Internal Revenue Service regulations. Under the terms of our stock
incentive plan, a “change in control” means:

(cid:120)

the sale, lease, exchange or other transfer of all or substantially all of our assets to a
corporation that is not controlled by us;
the approval by our stockholders of any plan or proposal for our liquidation or dissolution;
certain merger or business combination transactions;

(cid:120)
(cid:120)
(cid:120) more than 40% of our outstanding voting shares are acquired by any person or group of

persons who did not own any shares of common stock on the effective date of the plan; and
certain changes in the composition of our Board of Directors.

(cid:120)

If a change in control of NTIC had occurred on August 31, 2020, the number of options indicated in the
table below held by each of our named executive officers would have been automatically accelerated and
exercisable. The estimated value of the automatic acceleration of the vesting of unvested stock options
held by a named executive officer as of August 31, 2020 is also indicated in the table below and is based
on the difference between: (i) the market price of the shares of our common stock underlying the unvested
stock options held by such officer as of August 31, 2020 (based on the closing sale price of our common
stock on the last trading day of fiscal 2020, August 30, 2020 — $8.31), and (ii) the exercise price of the
options. As of August 30, 2020, all unvested options are out-of-the money.

Executive Officer
G. Patrick Lynch .............
Matthew C. Wolsfeld ......

Number of Unvested Options
Subject to Automatic Acceleration
62,552
46,234

Estimated Value of Automatic
Acceleration of Vesting

0
0

If the employment of our named executive officers was terminated as of August 31, 2020, they would
have been entitled to the following compensation and benefits, depending upon the applicable triggering
event:

Executive Officer
G. Patrick Lynch .......... Cash severance(1)

Type of Payment

Benefits continuation(2)
Equity acceleration(3)
Total:

Triggering Event

Involuntary
Termination
without
Cause
$ 1,627,552
29,940
0
$ 1,657,492

Qualifying
Change in
Control
Termination
$1,627,552
29,940
0
$1,657,492

Voluntary/
For Cause
Termination
0
$
0
0
0

Matthew C. Wolsfeld... Cash severance(1)

Benefits continuation(2)
Equity acceleration(3)
Total:

0
0
0
0

$ 907,016
29,940
0
$ 936,956

Death

0
0
0
0

Disability
0
$
0
0
0

0
0
0
0

__________________________
(1)

Represents the value of two times (one and one-half times, in the case of Mr. Wolsfeld) the executive’s
average total annual compensation for the two most recently completed fiscal years. Does not include a pro
rata portion of the target bonus that the executive otherwise would have been eligible to receive under our
bonus plan for the fiscal year during which the executive’s employment is terminated, since in light of the
assumed termination date of August 31, 2020, the last day of the fiscal year, such bonus would have been
earned.

(2)

(3)

Represents the value of medical, dental and vision benefit continuation for each executive and their family
for 18 months following the executive’s termination.

Represents the value of acceleration of all unvested shares that are subject to options, based on the
difference between the closing sale price of $8.31 per share as of the last trading day of fiscal 2020, August
30, 2020, and the exercise price. As of August 30, 2020, all unvested options are out-of-the money.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee has served as one of our officers or employees at any time.
Except as otherwise disclosed in this proxy statement, no member of the Compensation Committee has
had any relationship with NTIC requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act. None of our executive officers has served as a director, or member of the compensation
committee (or other committee serving an equivalent function), of an organization that has an executive
officer also serving as a member of our Board of Directors or Compensation Committee.

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS
________________

Introduction

Below under “—Description of Related Party Transactions” is a description of transactions that have
occurred during the past fiscal year, or any currently proposed transactions, to which we were or are a
participant and in which:

(cid:120)

the amounts involved exceeded or will exceed the lesser of: $120,000 or one percent (1%) of
the average of our total assets at year end for the last two completed fiscal years; and

a related person (including any director, director nominee, executive officer, holder of more
than 5% of our common stock or any member of their immediate family) had or will have a
direct or indirect material interest.

These transactions are referred to as “related party transactions.”

Procedures Regarding Approval of Related Party Transactions

As provided in our Corporate Governance Guidelines, the Audit Committee will review, approve or ratify
reportable related party transactions by use of the following procedures:

(cid:120) NTIC’s Chief Financial Officer, with the assistance of NTIC’s legal counsel, will evaluate the
disclosures provided in the director and officer questionnaires and from data obtained from
NTIC’s records for potential related person transactions.

(cid:120) Management will periodically, but no less than annually, report to the Audit Committee on all
related person transactions that occurred since the beginning of the prior fiscal year or that it
believes will occur in the next year. Such report should include information as to (i) the
related person’s relationship to NTIC and interest in the transaction; (ii) the material facts of
the transaction; (iii) the benefits to NTIC of the transaction; and (iv) an assessment of
whether the transaction is (to the extent applicable) in the ordinary course of business, at
arm’s length, at prices and on terms customarily available to unrelated third party vendors or
customers generally, and whether the related party had any direct or indirect personal interest
in, or received any personal benefit from, such transaction.

(cid:120) Taking into account the factors listed above, and such other factors and information as the

Audit Committee may deem appropriate, the Audit Committee will determine whether or not
to approve or ratify (as the case may be) each related party transaction so identified.

(cid:120) Transactions in the ordinary course of business, between NTIC and an unaffiliated

corporation of which a non-employee director of NTIC serves as an officer, that meet the
below criteria are deemed conclusively pre-approved:

o at arm’s length;

o at prices and on terms customarily available to unrelated third party vendors or customers

generally;

in which the non-employee director had no direct or indirect personal interest, nor
received any personal benefit; and

in amounts that are not material to NTIC’s business or the business of such unaffiliated
corporation.

Description of Related Party Transactions

Please see “Director Compensation” and “Executive Compensation” for information regarding a
consulting agreement we have with one of our current directors and the other compensation arrangements
with our directors and executive officers.

G. Patrick Lynch is the President and Chief Executive Officer of NTIC. Inter Alia Holding Company
owns 13.2% of the total voting power of NTIC. According to a Schedule 13D/A filed with the SEC on
October 22, 2019, Inter Alia Holding Company is an entity of which Mr. Lynch is a 47% stockholder.
Mr. Lynch shares equal voting and dispositive power over such shares with three other members of his
family. Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio 44122.

We have entered into agreements with all of our directors and executive officers under which we are
required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts
actually and reasonably incurred, including expenses of a derivative action, in connection with an actual
or threatened proceeding if any of them may be made a party because he or she is or was one of our
directors or executive officers. We will be obligated to pay these amounts only if the director or
executive officer acted in good faith and in a manner that he or she reasonably believed to be in or not
opposed to our best interests. With respect to any criminal proceeding, we will be obligated to pay these
amounts only if the director or executive officer had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim
for indemnification.

NTIC has not identified any arrangements or agreements relating to compensation provided by a third
party to NTIC’s directors or director nominees in connection with their candidacy or board service as
required to be disclosed pursuant to Nasdaq Rule 5250(b)(3).

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR
2022 ANNUAL MEETING OF STOCKHOLDERS
________________

Stockholder Proposals for 2022 Annual Meeting

Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for
inclusion in the proxy materials relating to the 2022 Annual Meeting of Stockholders must submit their
proposals so that they are received by us at our principal executive offices no later than the close of
business on August 2, 2021, unless the date of the meeting is delayed by more than 30 calendar days. The
proposals must satisfy the requirements of the proxy rules promulgated by the SEC and as the rules of the
SEC make clear, simply submitting a proposal does not guarantee that it will be included.

Any other stockholder proposals to be presented at the 2022 Annual Meeting of Stockholders (other than
a matter brought pursuant to SEC Rule 14a-8) must be given in writing to our Corporate Secretary and
must be delivered to or mailed to and received at our principal executive offices not less than 90 days nor
more than 120 days prior to the anniversary date of the 2021 Annual Meeting of Stockholders; provided,
however, that in the event that the 2022 Annual Meeting of Stockholders is not held within 30 days before
or after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first occurs. The proposal must contain
specific information required by our Amended and Restated Bylaws, a copy of which may be obtained by
writing to our Corporate Secretary. If a proposal is not timely and properly made in accordance with the
procedures set forth in our Amended and Restated Bylaws, it will be defective and may not be brought
before the meeting. If the proposal is nonetheless brought before the meeting and the Chairman of the
meeting does not exercise the power and duty to declare the proposal defective, the persons named in the
proxy may use their discretionary voting with respect to the proposal.

Director Nominations for 2022 Annual Meeting

In accordance with procedures set forth in our Bylaws, NTIC stockholders may propose nominees for
election to the Board of Directors only after providing timely written notice to our Corporate Secretary.
To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed to and
received at NTIC’s principal executive offices not less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting; provided, however, that in the event that
the annual meeting with respect to which such notice is to be tendered is not held within 30 days before or
after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made, whichever first occurs. The notice must set forth, among other
things:

(cid:120)

the nominee’s name, age, business address, residence address and record address;

the nominee’s principal occupation or employment;

the class and number of shares of NTIC capital stock which are beneficially owned by the
nominee;

signed consent to serve as a director of NTIC; and

(cid:120)

any other information concerning the nominee required under the rules of the SEC in a proxy
statement soliciting proxies for the election of directors.

Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be
considered. The Nominating and Corporate Governance Committee will consider only those stockholder
recommendations whose submissions comply with the procedural requirements set forth in NTIC’s
Bylaws. The Nominating and Corporate Governance Committee will evaluate candidates recommended
by stockholders in the same manner as those recommended by others.

COPIES OF FISCAL 2020 ANNUAL REPORT
________________

We have sent or made electronically available to each of our stockholders a copy of our annual
report on Form 10-K (without exhibits) for the fiscal year ended August 31, 2020. The exhibits to
our Form 10-K are available by accessing the SEC’s EDGAR filing database at www.sec.gov. We
will furnish a copy of any exhibit to our Form 10-K upon receipt from any such person of a written
request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits.
This request should be sent to: Northern Technologies International Corporation, 4201 Woodland
Road, Circle Pines, Minnesota 55014, Attention: Stockholder Information.

_________________________

Your vote is important. Whether or not you plan to attend the Annual Meeting in person, vote your
shares of NTIC common stock by the Internet or telephone, or request a paper proxy card to sign, date
and return by mail so that your shares may be voted.

By Order of the Board of Directors,

Richard J. Nigon
Chairman of the Board

November 30, 2020
Circle Pines, Minnesota

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

For the fiscal year ended August 31, 2020
or

Commission file number 001-11038
____________________

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

41-0857886
(I.R.S. Employer Identification No.)

4201 Woodland Road
P.O. Box 69
Circle Pines, Minnesota
(Address of principal executive offices)

55014
(Zip Code)

(763) 225-6600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, par value $0.02 per share

Trading Symbol(s)
NTIC

Name of each exchange on which registered
Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES (cid:133) NO (cid:54)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES (cid:133) NO (cid:54)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES (cid:54) NO (cid:133)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). YES (cid:54) NO (cid:133)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer (cid:133)

Accelerated filer (cid:133)

Non-accelerated filer (cid:54)

Smaller reporting company (cid:54)

Emerging growth company (cid:133)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133)

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. (cid:133)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES (cid:133) NO (cid:54)
The aggregate market value of the registrant’s common stock, excluding shares beneficially owned by affiliates, computed by reference to the
closing sales price at which the common stock was last sold as of February 29, 2020 (the last business day of the registrant’s second fiscal quarter) as
reported by the Nasdaq Global Market on that date was $86.9 million.

As of November 9, 2020, 9,104,636 shares of common stock of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the

registrant’s Proxy Statement for its 2021 Annual Meeting of Stockholders to be held January 15, 2021.

[This page intentionally left blank]

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED AUGUST 31, 2020

TABLE OF CONTENTS

PART I ......................................................................................................................................................................................... 1
BUSINESS ....................................................................................................................................................... 1
RISK FACTORS ............................................................................................................................................ 13
UNRESOLVED STAFF COMMENTS ......................................................................................................... 28
PROPERTIES ................................................................................................................................................ 28
LEGAL PROCEEDINGS .............................................................................................................................. 28
MINE SAFETY DISCLOSURES .................................................................................................................. 28
INFORMATION ABOUT OUR EXECUTIVE OFFICERS .......................................................................... 29
PART II ..................................................................................................................................................................................... 30

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 4A.

Page

Item 5.

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES ........................................................................... 30
SELECTED FINANCIAL DATA .................................................................................................................. 31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ......................................................................................................................................... 32
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............................... 49
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................................... 50
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ......................................................................................................................... 78
Item 9A. CONTROLS AND PROCEDURES .............................................................................................................. 78
OTHER INFORMATION .............................................................................................................................. 79
Item 9B.
PART III .................................................................................................................................................................................... 80
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ....................................... 80
EXECUTIVE COMPENSATION ................................................................................................................. 80
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS .................................................................................................... 80
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE .......................................................................................................................................... 82
PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................................................................... 82
PART IV .................................................................................................................................................................................... 83
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES ....................................................................... 83
FORM 10-K SUMMARY .............................................................................................................................. 87

Item 10.
Item 11.
Item 12.

Item 15.
Item 16.

Item 14.

Item 13.

_______________

This annual report on Form 10-K contains certain forward-looking statements that are within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and that are
subject to the safe harbor created by those sections. For more information, see “Part I. Item 1. Business – Forward-
Looking Statements.”

_______________

As used in this report, references to “NTIC,” the “Company,” “we,” “our,” or “us,” unless the context otherwise requires,
refer to Northern Technologies International Corporation and its wholly-owned and majority-owned subsidiaries, all of
which are consolidated on NTIC’s consolidated financial statements.

As used in this report, references to: (1) “NTIC China” refer to NTIC’s wholly-owned subsidiary in China, NTIC (Shanghai)
Co., Ltd.; (2) “NTI Europe” refer to NTIC’s wholly-owned subsidiary in Germany, NTIC Europe GmbH; (3) “Zerust
Mexico” refer to NTIC’s wholly-owned subsidiary in Mexico, ZERUST-EXCOR MEXICO, S. de R.L. de C.V; (4) “Zerust
Brazil” refer to NTIC’s majority-owned Brazilian subsidiary, Zerust Prevenção de Corrosão S.A.; (5) “Natur-Tec India”
refer to NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited; (6) “Natur Tec Lanka” refer to NTIC’s

majority-owned subsidiary in Sri Lanka, Natur Tec Lanka (Pvt) Ltd and (7) “NTI Asean” refer to NTIC’s majority-owned
holding company subsidiary, NTI Asean LLC, which holds investments in certain entities that operate in the Association of
Southeast Asian Nations (ASEAN) region, including the following countries: Indonesia, South Korea, Malaysia, Philippines,
Singapore, Taiwan, Thailand and Vietnam.

NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Except as otherwise
indicated, references in this report to NTIC’s joint ventures do not include any of NTIC’s wholly-owned or majority-owned
subsidiaries.

As used in this report, references to “EXCOR” refer to NTIC’s joint venture in Germany, Excor Korrosionsschutz –
Technologien und Produkte GmbH.

As used in this report, references to “Tianjin Zerust” refer to NTIC’s former joint venture in China, Tianjin-Zerust
Anticorrosion Co., Ltd.

All trademarks, trade names, or service marks referred to in this report are the property of their respective owners.

On June 3, 2019, the Company’s Board of Directors declared a two-for-one stock split of the Company’s common stock
effected in the form of a 100% share dividend distributed on June 28, 2019 to record holders as of June 17, 2019. All share
and per share values in this report have been adjusted to retroactively reflect the effect of the two-for-one stock split.

Item 1.

BUSINESS

Overview

PART I

Northern Technologies International Corporation (NTIC) develops and markets proprietary, environmentally-beneficial
products and services in over 60 countries either directly or via a network of subsidiaries, joint ventures, independent
distributors, and agents. NTIC’s primary business is corrosion prevention, marketed mainly under the ZERUST® brand.
NTIC has been selling its proprietary ZERUST® products and services to the automotive, electronics, electrical,
mechanical, military, and retail consumer markets for over 40 years and, in recent years, has targeted and expanded into
the oil and gas industry. NTIC also markets and sells a portfolio of bio-based and certified compostable (fully
biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These products are
intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.

NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids, coatings, rust
removers, cleaners, and diffusers as well as engineered solutions designed specifically for the oil and gas industry.
NTIC also offers worldwide, on-site, technical consulting for rust and corrosion prevention issues. NTIC’s technical
service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to
analyze their specific needs and develop systems to meet their performance requirements. In North America, NTIC
sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported
by a direct sales force.

Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China,
NTIC (Shanghai) Co., Ltd. (NTIC China), its majority-owned joint venture holding company for NTIC’s joint venture
investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), certain
majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
NTIC also sells products directly to its joint venture partners through its wholly-owned subsidiary in Germany, NTIC
Europe GmbH (NTI Europe).

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion prevention
technologies. Consequently, for the past several years, NTIC has focused significant sales and marketing efforts on the
oil and gas industry, as the infrastructure that supports that industry is typically constructed using metals that are highly
susceptible to corrosion. NTIC believes that its ZERUST® corrosion prevention solutions will minimize maintenance
downtime on critical oil and gas industry infrastructure, extend the life of such infrastructure, and reduce the risk of
environmental pollution due to leaks caused by corrosion.

NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to customers in the oil and gas industry
across several countries either directly, through its subsidiaries, or through its joint venture partners and other strategic
partners. The sale of ZERUST® corrosion prevention solutions to customers in the oil and gas industry typically
involves long sales cycles, often including multi-year trial periods with each customer and a slow integration process
thereafter.

Natur-Tec® bio-based and compostable plastics are manufactured using NTIC’s patented and/or proprietary
technologies and are intended to replace conventional petroleum-based plastics. The Natur-Tec® biopolymer resin
compound portfolio includes formulations that have been optimized for a variety of applications, including blown-film
extrusion, extrusion coating, injection molding, and engineered plastics. These resin compounds are certified to be fully
biodegradable in a composting environment and are currently being used to produce finished products, including can
liners, shopping and grocery bags, lawn and leaf bags, branded apparel packaging bags and accessories, and various
foodservice items, such as disposable cutlery, drinking straws, food-handling gloves, and coated paper products. In
North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of
regional and national distributors as well as independent agents. NTIC continues to see significant opportunities for
finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network
for finished Natur-Tec® bioplastic products.

Internationally, NTIC sells its Natur-Tec® resin compounds and finished products both directly and through its wholly-
owned subsidiary in China and majority-owned subsidiaries in India and Sri Lanka, and through distributors and certain
joint ventures.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) outbreak a global
pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains,
created significant volatility and disruption in financial markets and has resulted in an economic recession. As a result
of the COVID-19 pandemic and related government mandated restrictions on the Company’s business, as well as the
businesses of its joint ventures, customers and suppliers, disruption to the Company’s business and the manufacture and
sale of its products and services has occurred and is expected to continue into fiscal 2021. Additionally, the Company
expects the COVID-19 pandemic will likely continue to have a material adverse effect on its business, operating results
and financial condition in fiscal 2021; however, the precise financial impact and duration cannot be reasonably
estimated at this time.

In response to the impact of the COVID-19 pandemic, and given the uncertainty of its duration, the Company has taken
a number of precautionary measures, including the withdrawal and suspension of its specific full-year financial
guidance and the temporary suspension of its quarterly cash dividend.

NTIC’s Subsidiaries and Joint Venture Network

NTIC has ownership interests in nine operating subsidiaries in North America, South America, Europe, and Asia. The
following table sets forth a list of NTIC’s operating subsidiaries as of November 9, 2020, the country in which the
subsidiary is organized, and NTIC’s ownership percentage in each subsidiary:

Subsidiary Name

NTIC (Shanghai) Co., Ltd
NTI Asean LLC
Zerust Prevenção de Corrosão S.A.
ZERUST-EXCOR MEXICO, S. de R.L. de C.V
Natur-Tec India Private Limited
Natur Tec Lanka (Pvt) Ltd
NTIC Europe GmbH
Zerust Singapore Pte Ltd
Zerust Vietnam Co. Ltd
____________________

Country
China
United States
Brazil
Mexico
India
Sri Lanka(1)
Germany
Singapore(2)
Vietnam(2)

NTIC
Percent (%)
Ownership
100%
60%
85%
100%
75%
75%
100%
60%
60%

(1) Natur Tec Lanka (Pvt) Ltd. is 100% owned by Natur-Tec India Private Limited and, therefore, indirectly owned by

NTIC.

(2) Zerust Singapore Pte Ltd and Zerust Vietnam Co. Ltd are 100% owned by NTI Asean LLC and, therefore,

indirectly owned by NTIC.

The results of these subsidiaries are fully consolidated in NTIC’s consolidated financial statements.

NTIC participates in 19 active joint venture arrangements in North America, Europe, and Asia. Each of these joint
ventures generally manufactures and markets products in the geographic territory to which it is assigned. While most of
NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products, some of the joint ventures also sell NTIC’s

Natur-Tec® resin compounds. NTIC has historically funded its investments in joint ventures with cash generated from
operations.

The following table sets forth a list of NTIC’s operating joint ventures as of November 9, 2020, the country in which the
joint venture is organized, and NTIC’s ownership percentage in each joint venture:

Joint Venture Name

TAIYONIC LTD.
ACOBAL SAS
EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN
….UND PRODUKTE GMBH
ZERUST AB
MOSTNIC-ZERUST
ZERUST OY
HARITA-NTI LTD
ZERUST (U.K.) LTD.
EXCOR-ZERUST S.R.O.
EXCOR SP. Z.O.O.
ZERUST A.Ş.
ZERUST CONSUMER PRODUCTS, LLC
ZERUST – DNEPR
KOREA ZERUST CO., LTD.
ZERUST-NIC (TAIWAN) CORP.
PT. CHEMINDO – NTIA
ZERUST SPECIALTY TECH CO. LTD.
CHONG WAH-NTIA SDN. BHD.
NTIA ZERUST PHILIPPINES, INC.
____________________

(1) Indirect ownership interest through NTI Asean.

Country
Japan
France

Germany

Sweden
Russia
Finland
India
United Kingdom
Czech Republic
Poland
Turkey
United States
Ukraine
South Korea (1)
Taiwan (1)
Indonesia (1)
Thailand (1)
Malaysia (1)
Philippines (1)

NTIC
Percent (%)
Ownership
50%
50%

50%

50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
30%
30%
30%
30%
30%
30%

NTIC receives funds from its joint ventures as fees received for services that NTIC provides to its joint ventures and as
dividend distributions. The fees for services provided to joint ventures are determined based on either a flat fee or a
percentage of sales depending on local laws and tax regulations. With respect to NTIC’s joint venture in Germany
(EXCOR), NTIC recognizes an agreed upon quarterly fee for services. NTIC recognizes equity income from each joint
venture based on the overall profitability of the joint venture. Such profitability is subject to variability from quarter to
quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to quarter. The profits of each joint venture
are shared by the respective joint venture owners in accordance with their respective ownership percentages. NTIC
typically directly or indirectly owns 50% or less of each of its joint venture entities and, thus, does not control the
decisions of these entities regarding whether to pay dividends and, if paid, what amount is paid in a given year. The
payment of a dividend by an entity is determined by a joint vote of the owners and is not at the sole discretion of NTIC.

NTIC accounts for the investments and financial results of its joint ventures in its financial statements utilizing the
equity method of accounting.

NTIC considers EXCOR, ACOBAL SAS, ZERUST OY, HARITA-NTI LTD and ZERUST SPECIALTY TECH CO.
LTD. to be individually significant to NTIC’s consolidated assets and income as of August 31, 2020. Therefore, NTIC
provides certain additional information regarding these joint ventures in the notes to NTIC’s consolidated financial
statements and in this section of this report.

For more information regarding NTIC’s joint ventures and their effect on NTIC’s operating results, see NTIC’s
consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data” and “Part II. Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.

Products

NTIC derives revenues directly and/or indirectly through its subsidiaries and joint ventures from two reportable
business segments based on products sold, customer base, and distribution center: ZERUST® corrosion prevention
solutions and Natur-Tec® resin compounds and finished products.

ZERUST® Corrosion Prevention Solutions. In fiscal 2020, 72.4% of NTIC’s consolidated net sales were derived from
developing, manufacturing and marketing ZERUST® rust and corrosion inhibiting products and services. NTIC’s
consolidated net sales in fiscal 2020 included $34,474,535 in sales of ZERUST® rust and corrosion inhibiting products
and services, a decrease of 9.7% from such sales in fiscal 2019. Corrosion not only damages the appearance of metal
products and components but also negatively impacts their mechanical performance. This applies to the rusting of
ferrous metals (iron and steel) and the deterioration by oxidation of nonferrous metals (aluminum, copper, brass,
etc.). NTIC’s ZERUST® corrosion prevention solutions include plastic and paper packaging, powders, liquids,
coatings, rust removers, cleaners, diffusers, and engineered solutions for the oil and gas industry as well as technical
corrosion management and consulting services.

Plastic and Paper Packaging. NTIC’s ZERUST® packaging products contain proprietary chemical formulations that
continuously release an invisible and odorless corrosion inhibiting vapor that passivates metal surfaces and thereby
inhibits rust and corrosion. The corrosion inhibiting protection is maintained as long as the metal products to be
protected remain enclosed within the ZERUST® packaging. Electron scanning shows that once the contents are
removed from the ZERUST® packaging, the ZERUST® protection dissipates from the contents’ surfaces within two
hours, leaving a clean, dry, and corrosion-free metal component. This mechanism of corrosion protection enables
NTIC’s customers to easily package metal objects for rust-free shipment and/or long-term storage. Furthermore, by
eliminating costly greasing and degreasing processes and/or significantly reducing the use of certain coatings to inhibit
corrosion, NTIC’s ZERUST® corrosion prevention solutions provide customers significant savings in labor, material,
and capital expenditures for equipment to apply, remove, and dispose of oils and greases, as well as the attendant
environmental problems, as compared to traditional methods of corrosion prevention.

NTIC was first to develop the means of infusing volatile corrosion inhibiting chemical systems (VCIs) into
polyethylene and polypropylene resins. Combining ZERUST® chemical systems with polyethylene and polypropylene
resins permitted NTIC to introduce a line of plastic packaging products in the form of low and high-density
polyethylene bags and shroud film, including stretch, shrink, skin, and bubble cushioning film, thereby giving
packaging engineers an opportunity to ship and store ferrous, nonferrous, and mixed-metal products in a clean, dry, and
corrosion-free condition, with an attendant overall savings in total process costs. In addition to plastic packaging, NTIC
has developed additives to imbue kraft paper, corrugated cardboard, solid fiber, and chipboard packaging materials with
corrosion protection properties. NTIC’s ZERUST® plastic and paper packaging products come in various thicknesses,
strength enhancements, protection types, shapes, and sizes. This product line also includes items such as ZERUST® gun
cases, car covers, and tool-drawer liners, which are targeted at retail consumers.

Liquids and Coatings. NTIC’s corrosion prevention solutions include a line of metal surface treatment liquids and
coatings, which are oil, water, or bio-solvent based, and are marketed under brand names including Axxatec™,
Axxanol™, and Z-Maxx™. These liquids and coatings provide powerful corrosion protection in aggressive
environments, such as salt air, high humidity, and/or high temperatures. Products are formulated for most metal types
and protection levels. For exceptionally harsh environments, customers may choose to use a combination of NTIC’s
liquids and coatings with ZERUST® plastic and/or paper products to achieve robust corrosion protection during
manufacturing, shipping, and warehousing stages.

Rust Removers and Cleaners. NTIC also sells rust removal and cleaning products designed to restore rusty parts to a
usable condition without the use of labor-intensive, abrasive cleaners that damage surfaces and commonly fail to
remove rust from complex metal surfaces, like the teeth of small gears, under the Axxaclean™ brand name.

Diffusers. NTIC’s corrosion prevention solutions include a line of corrosion inhibiting vapor diffusers, such as
ZERUST® ActivPak®, ZERUST® ICT® Vapor Capsules, ZERUST® ICT® Plastabs®, ZERUST® ICT® Cor-Tabs®,
ZERUST® ICT® Pipe Strip, and ZERUST® ICT® Tube Strip. These diffusers are designed to protect metals within
enclosures, like switch gearboxes and electronic cabinets, or can be used as added protection to ZERUST® packaging
products. Diffusers work by permeating the interior air of an enclosure with an invisible and odorless corrosion
inhibiting vapor that protects nearby metal surfaces that are within a specific “radius of protection” for a period of one

or two years depending on the model. This invisible and dry protective layer revaporizes upon removal of the capsule
from the enclosure, leaving all surfaces clean, dry, residue-free, and corrosion-free.

Z-CIS® Technical Services. As an on-going effort to help NTIC’s customers improve and control their corrosion
management processes, NTIC markets and offers unique corrosion management and consulting services to target
customers. This ZERUST® corrosion inhibition system (known as Z-CIS®) leverages NTIC’s global network to
dispatch highly-trained technical service engineers to customer sites to solve complex corrosion problems. Several
major automotive companies and their automotive parts suppliers have used NTIC’s Z-CIS® system.

ZERUST® Corrosion Prevention Solutions Designed Specifically for the Oil and Gas Industry. NTIC has developed
proprietary engineered corrosion inhibiting solutions specifically for the mitigation of corrosion of the types of capital
assets used in the petroleum and chemical process industries and has targeted the sale of these ZERUST® corrosion
solutions to potential customers in the oil and gas industry. NTIC’s consolidated net sales in fiscal 2020 included
$2,782,874 in sales made to customers in the oil and gas industry, an increase of 2.0% from such sales in fiscal 2019.
NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain
subject to significant volatility, specifically due to the volatility of oil prices brought about by various political factors,
such as the recent price wars between Saudi Arabia and Russia, and economic factors, such as the recent price drop and
global production slowdown caused by travel and other restrictions related to the COVID-19 pandemic. Demand for
ZERUST® oil and gas products around the world depends primarily on market acceptance and the reach of NTIC’s
distribution network. Because of the typical size of individual orders and overall size of NTIC’s net sales derived from
sales of oil and gas products, the timing of one or more orders can materially affect NTIC’s sales compared to prior
fiscal year period sales. Projects in Europe and the Middle East are a small but strategically important part of the sales
growth picture. The infrastructure that supports the oil and gas industry is predominantly constructed using metals that
are highly susceptible to corrosion. The industrial environment at these facilities usually contains compounds, including
sulfides and chlorides, which cause aggressive corrosion. This problem affects the service life and safety of pipelines,
petroleum storage tanks, spare parts in long-term storage, processing, and other critical equipment. In addition to the
costs associated with the replacement of parts and structures, maintenance and repairs, and product loss, there are
significant economic losses associated with critical infrastructure being down for repair and maintenance. Furthermore,
there are also considerable health, safety, and environmental risks caused by corrosion that can greatly increase
economic losses. NTIC believes that its ZERUST® oil and gas corrosion prevention solutions minimize maintenance
downtime on critical oil and gas industry infrastructure, extend the life of such infrastructure, and reduce the risk of
environmental pollution due to leaks caused by corrosion.

NTIC’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange Savers®, ZERUST®
ReCAST-SSB solutions, and ZERUST® chemicals, including Zerion powders and gels, in addition to many of the
standard industrial ZERUST® rust and corrosion inhibiting products previously described.

ZERUST® Flange Savers® are specially designed covers that have been impregnated with a proprietary ZERUST®
inhibitor formulation to provide corrosion protection for flanges, valves, and welded joints. Oil and gas pipeline
segments are connected by flanges and welded joints of varying sizes, designs, and materials. These connection points
often corrode under aggressive industrial environments and harsh operating conditions, thereby causing costly
maintenance, operational, and safety problems. ZERUST® Flange Savers® are available in various sizes to
accommodate different pipe diameters, pressure ratings, and international standards for pipeline valves and flanges.

ZERUST® ReCAST-SSB solutions protect the Soil Side Bottoms (SSB) of aboveground storage tanks through a variety
of unique and highly effective delivery systems designed by the Zerust Oil & Gas team to deliver proprietary Zerion
FVS corrosion inhibitor to spaces under tank bottoms that are susceptible to significant corrosion. Tank bottoms are
typically made of steel plates, which are in direct contact with a foundation surface that may be concrete, sand/soil, or
asphalt/bitumen. It is typically not possible to protect this underside surface with traditional coatings. Cathodic
protection (CP) systems can only provide partial protection, but also have significant limitations that cause failures well
ahead of the expected service life of a tank. The ZERUST® solutions provide effective protection even to areas that
cannot be addressed with CP. These are engineered solutions where each system is tailored to a customer’s
requirements depending on factors including the tank foundation design, specific environmental conditions, and tank
diameter.

ZERUST® Zerion powder-based inhibitor solutions include the following:

(cid:120) Zerion FVS is a unique inhibitor blend that is used in both the SSB Solutions and in internal pipeline

protection. This “best-in-class” product has been successfully deployed at multiple client sites in North and
South America, Europe, the Middle East, India as well as other parts of Asia.

(cid:120) Zerion FAN-5 is a lower cost inhibitor that is very effective at protecting metals upon contact. It can be used to
treat large volumes of water that may be used for hydrotesting. In combination with Zerion FVS, it offers a
more complete solution for the protection of pipeline internals.

(cid:120) AutoFog is a revolutionary product that allows for the quick VCI saturation of large volume spaces without the
need for mechanical “fogging” equipment. This rapid self-diffusing capability is designed for sealed void
spaces, protection of large/complex assets like heat exchangers, and heater-treaters.

(cid:120) Sol-V C-Series is designed to provide corrosion prevention in voids and enclosures especially when there is
either stagnant water or the potential for water seepages and/or accumulation of water over time. ZERUST®
Sol-V™ C-Series packaging allows VCIs to release while conserving a Sol-V proprietary blend of soluble
corrosion inhibitors (SCIs) until water enters the system. Typical applications of ZERUST® Sol-V™ C-Series
packaging include offshore platform leg voids, vessels and tanks mothballed in tropical environments, ship
blocks being fabricated in areas of high humidity, piping systems, and heat exchangers.

Natur-Tec® Resin Compounds and Finished Products. NTIC manufactures and sells a broad range of bioplastic
packaging solutions, including bio-based and certified compostable (fully biodegradable) polymer resin compounds,
and finished products under the Natur-Tec® brand. NTIC’s consolidated net sales in fiscal 2020 included $13,164,156
in sales of Natur-Tec® resins and finished products, a decrease of 25.1% over such sales in fiscal 2019. Market drivers
such as volatile petroleum prices, reduced dependence on foreign oil, reduced carbon footprints, requirements by
multinational brands for sustainable packaging solutions that meet Circular Economy and environmentally responsible
end-of-life disposal mandates, and concerns about plastic residue in the environment have led to heightened interest in
using sustainable, bio-based and renewable plant-biomass resources for the manufacture of plastics and industrial
products. Plastics that are fully biodegradable in composting or anaerobic digestor systems allow the safe and effective
conversion of these plastics to carbon dioxide, water, and fertilizer at the end of their service life. Increased
environmental and sustainability awareness at the corporate and consumer level, improved technical properties and
product functionality, as well as recent foreign, state, and local governmental regulations banning the use of
conventional plastics or mandating the use of certain biodegradable or compostable products have also fueled this
interest in bio-based and biodegradable-compostable plastics. The term “bio-plastics” encompasses a broad category of
plastics that are either bio-based, which means derived from renewable resources such as corn or cellulosic/plant
material or blends thereof, or are engineered to be fully compostable, or both.

Resin Compounds. Natur-Tec® resin compounds are produced by blending commercially available base resins, such as
Ecoflex® from BASF and Ingeo® PLA from NatureWorks LLC, with organic and inorganic fillers and proprietary
polymer modifiers and compatibilizers using NTIC’s proprietary and patented ReX Process. In this process,
biodegradable polymers, natural polymers made from renewable, plant-biomass resources, and organic and inorganic
materials are reactively blended in the presence of proprietary compatibilizers and polymer modifiers to produce bio-
based and/or compostable polymer resin formulations that exhibit unique and stable morphology. Natur-Tec® resin
compounds are engineered for high performance, ease of processing, and reduced cost compared to most other bio-
plastic materials and can be processed by converters using conventional plastic manufacturing processes and
equipment.

Natur-Tec® resin compounds are available in several grades tailored for a variety of applications, such as blown-film
extrusion, profile extrusion, thermoforming, extrusion coating, and injection molding.

Natur-Tec® flexible film resin compounds are fully compostable and meet the requirements of international standards
for compostable plastics, such as ASTM (American Society for Testing and Materials) D6400 (U.S.), EN 13432
(European standards for products and services by European Committee for Standardization), and ISO (International
Organization for Standardization) 17088, and are certified as 100% compostable by organizations including the BPI
(Biodegradable Products Institute) in the United States and TÜV Austria in Europe. Natur-Tec® film resin compounds
can be used to produce film for applications, such as bags, including compost bags, lawn and leaf bags, pet waste

collection bags, and carry-out bags, agricultural film, and consumer and industrial packaging. Natur-Tec® film resin
compounds are also used to produce bags and covers for branded apparel packaging and to manufacture specialty
foodservice items, such as compostable drinking straws, thermoformed lids and disposable food-handling gloves.

The Natur-Tec® compostable extrusion coating resin compounds are bio-based and biodegradable and are designed to
replace conventional plastic materials for extrusion coating applications. Natur-Tec® extrusion coating resin
compounds are manufactured using sustainable and renewable resources, per the ASTM D6866 standard, which allows
companies and consumers the opportunity to reduce or neutralize their carbon footprint, and are designed to meet the
requirements of international standards for compostable plastics, such as ASTM D6400. Natur-Tec® extrusion coating
resin compounds provide good adhesion to paper, an excellent print surface, and good heat seal strength and the coating
material is suitable for food contact applications, including both hot and cold applications. Natur-Tec® extrusion
coating resin compounds can be used for coating paper and paperboards for the manufacture of disposable cups, plates,
and other foodservice items.

The Natur-Tec® compostable injection molding resin compounds are bio-based and compostable and are designed to
replace conventional plastic materials for injection molded plastic applications. Natur-Tec® compostable injection
molding resin compounds are manufactured using sustainable and renewable resources, per the ASTM D6866 standard,
and are designed to meet the requirements of international standards for compostable plastics, such as ASTM D6400
and EN 13432. Natur-Tec® compostable injection molding resin compounds can be used for injection molded plastic
applications, such as cutlery, pens, hangers, containers, and packaging. Natur-Tec® bio-based injection molding resin
compounds are made with at least 90% bio-based/renewable resource-based materials, per the ASTM D6866 standard,
and are meant to enhance sustainability by replacing petroleum-based plastics. Natur-Tec® bio-based injection molding
resin compounds exhibit the same properties as conventional plastic materials and can be used in applications such as
automotive components, consumer goods, electronics, medical products, furniture, and packaging.

Finished Products. Natur-Tec® finished products include totally biodegradable and compostable trash bags,
agricultural film, and other single-use disposable products, such as compostable cutlery and food and consumer goods
packaging currently marketed under the Natur-Bag® or Natur-Ware® brands.

The Natur-Bag® product line offers 15 different compostable trash bag sizes, from 3-gallon to 96-gallon, as well as
shopper bags. The bags are available in various SKU configurations, including retail packs that are sold to the
consumer either through retail outlets or through online stores and industrial case packs that are sold to commercial and
industrial customers primarily through wholesalers and distributors. The Natur-Bag® products are manufactured from
the Natur-Tec® flexible film resin compounds and thus are fully biodegradable and compostable.

The Natur-Ware® product line consists of bio-based and compostable cutlery made from the Natur-Tec® compostable
injection molding resin compounds. Natur-Ware® cutlery can be composted along with food scraps in zero-waste
programs.

Both Natur-Bag® and Natur-Ware® products are fully certified compostable and carry the BPI Compostable logo in the
United States and the TÜV Austria OK Compost logo in Europe. Furthermore, these products were also independently
tested and approved for use in organic waste diversion systems by Cedar Grove, one of the largest compost operators in
the United States.

Sales, Marketing, and Distribution

ZERUST® Corrosion Prevention Solutions. In the United States, NTIC markets its ZERUST® rust and corrosion
inhibiting products and services, including its products designed for the oil and gas industry, principally to industrial
users in the automotive, electronics, electrical, mechanical, military, retail consumer, and oil and gas markets by a direct
sales force and through a network of independent distributors, manufacturer’s sales representatives, and strategic
partners. Prior to placing an order, NTIC’s technical service consultants work directly with the end users of NTIC’s
ZERUST® products to analyze their specific corrosion prevention needs and develop systems to meet their performance
requirements.

Internationally, NTIC has entered into a series of joint ventures with foreign partners (either directly or through a
holding company). NTIC receives fees for providing technical support, marketing assistance, and other services to its

joint ventures based primarily on the net sales of the individual joint ventures in accordance with the terms of the joint
venture arrangements. Such services include consulting, legal, insurance, technical, and marketing services.

In China, NTIC sells its products and services through NTIC China. NTIC has a wholly-owned or majority-owned
subsidiaries to conduct its business in Brazil, Mexico, Vietnam and Singapore.

With respect to the sales and marketing of ZERUST® rust and corrosion inhibiting products and services to the oil and
gas industry, NTIC uses a combination of direct sales personnel, independent sales agents, and its joint venture network.
In addition, in an attempt to penetrate the oil and gas industry within certain markets more quickly, NTIC has entered
into various agreements with specific organizations that have existing long-term relationships with key oil and gas
industry clients. NTIC also engages in certain direct marketing activities to build its brand within the oil and gas
industry, such as traditional advertising and direct mail campaigns and presence and participation at selected key trade
shows and technical forums. Additionally, NTIC has worked to adapt its marketing activities in light of the COVID-19
pandemic. NTIC continues to believe the sale of its ZERUST® corrosion prevention solutions to customers in the oil
and gas industry will involve long sales cycles, likely including multi-year trial periods with each user and a slow
integration process thereafter.

Natur-Tec® Resin Compounds and Finished Products. In the United States, NTIC markets its Natur-Tec® resin
compounds and finished products through a network of national and regional distributors and independent
manufacturer’s sales representatives and two NTIC direct sales employees as of August 31, 2020. Target customers for
Natur-Tec® finished products include individual consumers as well as commercial and institutional organizations, such
as corporations and government agencies, and educational organizations, such as universities and school districts. NTIC
is also targeting key national and regional retailers utilizing independent sales agents. Target customers for Natur-Tec®
resin compounds include film extruders and injection molders that would purchase Natur-Tec® resin compounds to
manufacture and sell their own finished bio-based and compostable end products, such as film, bags, and cutlery.
Additionally, NTIC is targeting retailers and customers that may have applications for our products related to the
COVID-19 pandemic.

Internationally, NTIC uses Natur-Tec India, Natur Tec Lanka, NTI China and a network of international distributors to
market its Natur-Tec® resin compounds and finished products. With Indian government mandates banning the use of
non-biodegradable plastics in certain types of food and consumer packaging, NTIC expects the market in India for bio-
plastic packaging solutions to continue to grow substantially. Similarly, in the last fiscal year, NTIC saw a rise in the
sales of Natur-Tec® products in China and anticipates that sales will continue to grow.

Competition

ZERUST® Corrosion Prevention Solutions. While NTIC is unaware of any third parties with which NTIC competes
on a worldwide basis with respect to its corrosion prevention solutions, NTIC does compete with several third parties on
a regional basis. NTIC evaluates competing rust and corrosion inhibiting products on an ongoing basis. Some of
NTIC’s competitors are established companies that may have financial resources, marketing capabilities, distribution
networks and other resources substantially greater than those of NTIC. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the
promotion and sale of their products than NTIC. With respect to its rust and corrosion inhibiting products, NTIC
competes on the basis of product innovation, quality, reliability, product support, customer service, reputation, and
price. Some of NTIC’s competitors may have achieved significant market acceptance of their competing products and
brand recognition. NTIC, however, believes it has an advantage over most of its competitors as a result of NTIC’s
technical innovation and its value-added services. NTIC attempts to provide its customers with the highest level of
technical service and applications engineering in addition to ZERUST® rust and corrosion inhibiting products.
Nonetheless, the commoditization of certain of NTIC’s ZERUST® rust and corrosion inhibiting products has led, and
may continue to lead, to lower prices and lower margins on such products. In addition, because certain barriers to entry
are low, additional competitors may emerge, which likely would lead to the further commoditization of NTIC’s rust and
corrosion inhibiting products.

With respect to NTIC’s corrosion prevention solutions for use in the oil and gas industry, NTIC’s primary barrier to
entry is a combination of conservatism, complacency, and confidence in old approaches, as well as the complexity of
the buying organizations. Some of NTIC’s competitors with respect to its traditional ZERUST® rust and corrosion
inhibiting products also compete in the oil and gas industry. NTIC also faces competition from new suppliers who

provide alternative approaches to corrosion prevention, some of which have a significant market presence and more
years of experience and credibility in the oil and gas industry. Original equipment manufacturer (OEM) suppliers to the
oil and gas industry present a new market vertical for NTIC’s traditional industrial ZERUST® products.

Natur-Tec® Resin Compounds and Finished Products. With respect to NTIC’s Natur-Tec® resin compounds and
finished products, NTIC competes with several established companies that have been producing and selling similar
products for a significantly longer time period and have significantly more sales, more extensive and effective
distribution networks, and better brand recognition than NTIC. Most of these companies also have substantially more
financial and other resources than NTIC. NTIC competes on the basis of performance, brand awareness, distribution
network, product availability, product offering, improved shelf life, place of manufacture, and price. Because of price
competition, NTIC’s margins on its Natur-Tec® resin compounds and finished products are lower than its margins on its
ZERUST® corrosion prevention solutions. NTIC also has encountered in the past and could continue to encounter
additional supply constraints for the base resins used to manufacture NTIC’s Natur-Tec® resin compounds and finished
products since there are a limited number of suppliers of such base resins and limited capacity for their production.

Research and Development

NTIC’s research and development activities are directed at improving existing products, developing new products,
reducing costs, and improving quality assurance through improved testing of NTIC’s products. NTIC’s internal
research and development activities are conducted at its facilities located in Circle Pines, Minnesota; Beachwood, Ohio;
and Dresden, Germany under the direction of internationally known scientists and research institutes under exclusive
contract with NTIC with respect to the subject of their respective research efforts. EXCOR has established a wholly-
owned subsidiary, Excor Korrosionsforschung GmbH, to conduct research into new fields of corrosion inhibiting
packaging and the applications engineering of such products in conjunction with NTIC’s domestic research and
development operations. With respect to NTIC’s Natur-Tec® resin compounds and finished products, Ramani Narayan,
Ph.D., a current director of NTIC and Distinguished Professor in the Department of Chemical Engineering & Materials
Science at Michigan State University, provides his expertise and technical support to NTIC.

NTIC anticipates that it will spend between $3,900,000 and $4,100,000 in fiscal 2021 on research and development
activities.

Intellectual Property Rights

NTIC’s success depends and will continue to depend in part upon its ability to maintain patent and trademark protection
for its products and processes, to preserve its proprietary information and trade secrets, and to operate without infringing
the proprietary rights of third parties. NTIC’s policy is to attempt to protect its technology by, among other things,
filing patent applications and trademark applications and vigorously preserving the trade secrets covering its technology
and other intellectual property rights.

In 1980, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting packing
material in the world. The U.S. patent granted under this patent application became the most important intellectual
property right in NTIC’s history. This patent expired in 2000. NTIC has since filed for 12 letters of patent in the
United States covering various corrosion inhibiting technologies, systems, and applications and now owns several
patents in these areas. These patents and patent applications have been extended to the countries of strategic relevance
to NTIC, including Australia, Brazil, Canada, China, Europe, Japan, India, Korea, Mexico, Russia, and Taiwan. In
addition, EXCOR owns several patents in the area covering various corrosion inhibiting technologies and has also
applied for new patents on proprietary new corrosion inhibiting technologies. NTIC is also seeking additional patent
protection covering various host materials into which its corrosion inhibiting additives and other protective features can
be incorporated, proprietary new process technologies, and chemical formulations outside the area of corrosion
protection. NTIC owns several patents outside the area of corrosion protection both in the United States and in
countries of strategic relevance to NTIC, including the above-noted countries.

In addition to seeking patent protection, NTIC maintains an extensive portfolio of trademarks in countries where NTIC
has a presence directly or through its subsidiaries and joint ventures. NTIC continuously pursues new trademark
applications of strategic interest worldwide. NTIC owns the following U.S. registered trademarks: NTI®, NTI & Globe
Design®, ZERUST®, EXCOR®, ICT®, Z-CIS®, COR TAB®, PLASTABS®, NATUR-TEC®, NATUR-TEC & Design®,
NATUR-BAG® and NATUR-WARE®, ZERION®, AUTOFOG®, FLANGE SAVER®, and ACTIVPAK®. NTIC also

has a registered trademark on the use of the Color Yellow with respect to corrosion inhibiting packaging. Furthermore,
NTI®, ZERUST®, EXCOR®, the Color Yellow®, and NTI ASEAN®, as well as other marks, have been registered in the
European Union, and several new applications are pending.

NTIC requires its employees, consultants, and advisors with access to its confidential information, including trade
secrets, to execute confidentiality agreements upon commencement of their employment or consulting relationships
with NTIC. These agreements generally provide that all confidential information NTIC develops or makes known to
the individual during the course of the individual’s employment or consulting relationship with NTIC must be kept
confidential by the individual and not disclosed to any third parties. NTIC also requires all of its employees and
consultants who perform research and development for NTIC to execute agreements that generally provide that all
inventions developed by these individuals during their employment or service arrangement with NTIC will fall under
NTIC’s proprietary intellectual property rights.

Manufacturing

NTIC’s ZERUST® rust and corrosion inhibiting products are manufactured according to NTIC’s specifications
primarily by selected independent sub-contractors under trade secrecy agreements and/or license agreements. In
addition, NTIC manufactures select ZERUST® rust and corrosion inhibiting products, consisting primarily of liquids
and powders, at its corporate headquarters location in Circle Pines, Minnesota.

NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in India, China, Malaysia, and
California, USA. NTIC’s Natur-Tec® resin compounds can be shipped to manufacturing facilities around the world,
where they then can be converted into finished products, such as a bag or piece of cutlery. NTIC’s Natur-Tec® finished
products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors.

NTIC is ISO 9001 certified with respect to the manufacturing of its products. NTIC believes that the process of ISO
9001 certification serves as an excellent total quality management tool, enabling NTIC to ensure consistency in the
performance of its products. In addition, because potential customers may prefer or require manufacturers to have
achieved ISO certification, such ISO certifications may provide NTIC with certain competitive advantages.

Availability of Raw Materials

NTIC does not typically carry excess quantities of raw materials because of widespread availability for such materials
from various suppliers. However, with respect to its Natur-Tec® resin compounds and finished products, there are a
limited number of suppliers of the base resins used to manufacture the resin compounds and finished products.
Additionally, there is growing demand for these base resins. In the past and during fiscal year 2020, NTIC has
experienced some delays in obtaining such base resins. In addition, a few raw materials and purchased parts used in
NTIC’s rust and corrosion inhibiting products and Natur-Tec® finished products are sourced from suppliers who
currently serve as NTIC’s sole source of supply for these materials and parts. Although NTIC believes it can obtain
these raw materials and parts from other suppliers, an unexpected loss of supply over a short period of time may not
allow NTIC time to replace these sources in the ordinary course of business.

Backlog

NTIC had an estimated order backlog of $3,593,000 as of August 31, 2020, compared to $3,224,000 as of August 31,
2019, which was generally across all business units. Sales relating to this backlog are expected to be realized during
first quarter of fiscal 2021. These are orders that are held by NTIC pending release instructions from the customers to
be used for just-in-time production. Customers generally place orders on an “as needed” basis and expect delivery
within a relatively short period of time.

Governmental Regulation

The U.S. Food and Drug Administration (FDA) has indicated to NTIC that it has no objection to the use of ZERUST®
ICT® packaging products in protecting metal food containers and processing equipment. In addition, the manufacture,
sale and use of NTIC’s Natur-Tec® resin compounds and finished products are subject to regulation in the United States
by the FDA. The FDA’s regulations are concerned with substances used in food packaging materials. Thus, food and
beverage containers are in compliance with FDA regulations if the components used in the food and beverage

containers are approved by the FDA as indirect food additives for their intended uses and comply with the applicable
FDA indirect food additive regulations or are generally recognized as safe for their intended uses and are of suitable
purity for those intended uses. NTIC believes that its resin compounds are in compliance with all FDA requirements
and that NTIC does not require further FDA approval prior to the sale of its products.

Employees

As of August 31, 2020, NTIC had 78 full-time employees located in North America, consisting of 21 in sales and
marketing, 19 in research and development and lab, 27 in administration, and 11 in production. As of August 31, 2020,
NTIC’s wholly-owned subsidiary in China had 35 full-time employees, its majority-owned subsidiary in Brazil had
20 full-time employees, its majority-owned subsidiary in India had 9 full-time employees, its wholly owned subsidiary
in Mexico had no full-time employees, and its holding company, NTI Asean, had no full-time employees. There are no
unions representing NTIC’s employees, and NTIC believes that its relations with its employees are good.

Available Information

NTIC is a Delaware corporation that was originally organized as a Minnesota corporation in 1970. NTIC’s principal
executive office is located at 4201 Woodland Road, Circle Pines, Minnesota 55014, and its telephone number is (763)
225-6600. NTIC’s website is located at www.ntic.com. References to NTIC’s website addressed in this report are
provided as a convenience and as an inactive textual reference only. The information on NTIC’s website or any other
website is not incorporated by reference into, and is not considered a part of, this report.

NTIC makes available, free of charge and through its Internet web site, its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after
NTIC electronically files such material with, or furnishes it to, the Securities and Exchange Commission (SEC).
Reports filed with the SEC may be viewed at www.sec.gov.

Forward-Looking Statements

This report on Form 10-K contains not only historical information, but also forward-looking statements that are within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. In
addition, NTIC or others on NTIC’s behalf may make forward-looking statements from time to time in oral
presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on
NTIC’s Internet web site, or otherwise. All statements other than statements of historical facts included in this report or
expressed by NTIC orally from time to time that address activities, events, or developments that NTIC expects,
believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the
statements about NTIC’s plans, objectives, strategies, and prospects regarding, among other things, the statements about
NTIC’s plans, objectives, strategies, and prospects regarding, among other things, NTIC’s financial condition, results of
operations and business, the anticipated effect of COVID-19 on NTIC’s business, operating results and financial
condition, the outcome of contingencies, such as legal proceedings and the effect of the liquidation of Tianjin Zerust,
and the operations of NTIC China. NTIC has identified some of these forward-looking statements in this report with
words like “believe,” “can,” “may,” “could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,”
“should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “approximate,” “outlook,” or “continue” or the
negative of these words or other words and terms of similar meaning. The use of future dates is also an indication of a
forward-looking statement. Forward-looking statements may be contained in the notes to NTIC’s consolidated financial
statements and elsewhere in this report, including under “Part II. Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”

Forward-looking statements are based on current expectations about future events affecting NTIC and are subject to
uncertainties and factors that affect all businesses operating in a global market as well as matters specific to NTIC.
These uncertainties and factors are difficult to predict, and many of them are beyond NTIC’s control. The following are

some of the uncertainties and factors known to us that could cause NTIC’s actual results to differ materially from what
NTIC has anticipated in its forward-looking statements:

(cid:120) The effect of COVID-19 on NTIC’s business, operating results and financial condition, including disruption to

our customers, suppliers and subcontractors, as well as the global economy and financial markets;

(cid:120) The effect of current worldwide economic conditions and any turmoil and disruption in the global credit and

financial markets on NTIC’s business;

(cid:120) Variability in NTIC’s sales of ZERUST® products and services to the oil and gas industry and Natur-Tec®
products and NTIC’s equity income of joint ventures, which variability in sales and equity in income from
joint ventures, in turn, subject NTIC’s earnings to quarterly fluctuations;

(cid:120) Risks associated with NTIC’s international operations and exposure to fluctuations in foreign currency

exchange rates, import duties, taxes, and tariffs;

(cid:120) The effect of the United Kingdom’s process to exit the European Union on NTIC’s operating results,

including, in particular, future net sales of NTIC’s European and other joint ventures;

(cid:120) The effect of the health of the U.S. automotive industry on NTIC’s business;
(cid:120) NTIC’s dependence on the success of its joint ventures and fees and dividend distributions that NTIC receives

from them;

(cid:120) NTIC’s relationships with its joint ventures and its ability to maintain those relationships, especially in light of

anticipated succession planning issues;

(cid:120) Fluctuations in the cost and availability of raw materials, including resins and other commodities;
(cid:120) The success of and risks associated with NTIC’s emerging new businesses and products and services,

including in particular NTIC’s ability and the ability of NTIC’s joint ventures to sell ZERUST® products and
services to the oil and gas industry and Natur-Tec® products and the often lengthy and extensive sales process
involved in selling such products and services;

(cid:120) NTIC’s ability to introduce new products and services that respond to changing market conditions and

customer demand;

(cid:120) Market acceptance of NTIC’s existing and new products, especially in light of existing and new competitive

products;

(cid:120) Maturation of certain existing markets for NTIC’s ZERUST® products and services and NTIC’s ability to grow

(cid:120)

market share and succeed in penetrating other existing and new markets;
Increased competition, especially with respect to NTIC’s ZERUST® products and services, and the effect of
such competition on NTIC’s and its joint ventures’ pricing, net sales, and margins;

(cid:120) NTIC’s reliance upon and its relationships with its distributors, independent sales representatives, and joint

ventures;

(cid:120) NTIC’s reliance upon suppliers;
(cid:120) Oil prices, which may affect sales of NTIC’s ZERUST® products and services to the oil and gas industry;
(cid:120) NTIC’s operations in China, and the risks associated therewith, the termination of the joint venture agreements
with Tianjin Zerust, and the anticipated liquidation of Tianjin Zerust and the effect of all these events on
NTIC’s business and future operating results;

(cid:120) The costs and effects of complying with laws and regulations and changes in tax, fiscal, government, and other

regulatory policies, including rules relating to environmental, health, and safety matters;

(cid:120) Unforeseen product quality or other problems in the development, production, and usage of new and existing

products;

(cid:120) Unforeseen production expenses incurred in connection with new customers and new products;
(cid:120) Loss of or changes in executive management or key employees;
(cid:120) Ability of management to manage around unplanned events;
(cid:120) Pending and future litigation;
(cid:120) NTIC’s reliance on its intellectual property rights and the absence of infringement of the intellectual property

rights of others;

(cid:120) NTIC’s ability to maintain effective internal control over financial reporting, especially in light of its joint

venture arrangements;

(cid:120) Changes in applicable laws or regulations and NTIC’s failure to comply with applicable laws, rules, and

regulations;

(cid:120) Changes in generally accepted accounting principles and the effect of new accounting pronouncements;
(cid:120) Fluctuations in NTIC’s effective tax rate, including from the Tax Cuts and Jobs Act;

(cid:120) The effect of extreme weather conditions on NTIC’s operating results; and
(cid:120) NTIC’s reliance upon its management information systems.

For more information regarding these and other uncertainties and factors that could cause NTIC’s actual results to differ
materially from what NTIC has anticipated in its forward-looking statements or otherwise could materially adversely
affect its business, financial condition, or operating results, see “Part I. Item 1A. Risk Factors.”

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing
cautionary statements. NTIC wishes to caution readers not to place undue reliance on any forward-looking statement
that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results,
which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking
statements and from historical results due to the uncertainties and factors described above and others that NTIC may
consider immaterial or does not anticipate at this time. Although NTIC believes that the expectations reflected in its
forward-looking statements are reasonable, NTIC does not know whether its expectations will prove correct. NTIC’s
expectations reflected in its forward-looking statements can be affected by inaccurate assumptions NTIC might make or
by known or unknown uncertainties and factors, including those described above. The risks and uncertainties described
above are not exclusive, and further information concerning NTIC and its business, including factors that potentially
could materially affect its financial results or condition, may emerge from time to time. NTIC assumes no obligation to
update, amend, or clarify forward-looking statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements. NTIC advises you, however, to consult any further disclosures NTIC makes
on related subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K
that NTIC files with or furnishes to the SEC.

Item 1A. RISK FACTORS

The following are the most material factors known to NTIC that could materially adversely affect its business, operating
results, or financial condition.

Risks Related to NTIC’s Business and Industry

Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the
automotive industry, may negatively impact NTIC’s business, operating results, and financial condition.

The U.S. and world economies may suffer from uncertainty, volatility, disruption, and other adverse conditions, such as
the impact of the COVID-19 pandemic, and those conditions have adversely impacted and may continue to adversely
impact the business community and the financial markets. Adverse economic and financial market conditions may
negatively affect NTIC’s customers and its markets, thereby negatively impacting its business and operating results.
For example, weak market conditions could extend the length of NTIC’s sales cycle and cause potential customers to
delay, defer, or decline to make purchases of NTIC’s products and services due to uncertainties surrounding the future
performance of their businesses, limitations on their capital expenditures due to internal budget constraints, the inability
to obtain financing in the capital markets, and the adverse effects of the economy on their business and financial
condition. As a result, if economic and financial market conditions weaken or deteriorate, then NTIC’s business,
financial condition, and operating results, including its ability to grow and expand its business and operations, could be
materially and adversely affected.

NTIC’s operating results are especially dependent upon the economic health of the economies in the United States,
Europe, India and China. Since a significant portion of NTIC’s ZERUST® rust and corrosion inhibiting products and
services are sold to customers in the automotive industry, adverse economic conditions affecting the automotive
industry, in particular, may result in an adverse effect on NTIC’s net sales and its other operating results. Accordingly,
any weakness in the global economy, particularly the United States, Europe, India and China, and in the automotive
industry, have negatively impacted and may continue to negatively impact NTIC’s business, operating results, and
financial condition.

The COVID-19 pandemic has adversely impacted and will likely continue to adversely impact NTIC’s business,
operating results and financial condition.

The COVID-19 pandemic has resulted in a substantial curtailment of business activities worldwide and has caused, and
continues to cause, recessionary economic conditions in many countries, including the United States and many countries
abroad. As part of efforts to contain the spread of COVID-19, many state, local and foreign governments have imposed
various restrictions on the conduct of business and travel. While some of these restrictions have been curtailed or lifted,
others have been reinstated or may be reinstated in the future. Government restrictions, such as stay-at-home orders,
quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of business closures and
slowdowns. These business closures and slowdowns adversely impacted, and will likely continue to adversely impact,
NTIC directly and have caused its customers and suppliers to slow or stop production, which has significantly disrupted
and will likely continue to significantly disrupt NTIC’s sales, production and supply chain. For example, as a result of
the COVID-19 outbreak in China, NTIC experienced decreased demand for its products and services in China and other
places in Asia, commencing during the second quarter of fiscal 2020. These and other factors contributed to NTIC
experiencing significantly decreased global demand for its products and services during fiscal 2020, which will likely
continue during fiscal 2021. This significantly decreased demand has had, and will likely continue to have, a material
adverse effect on NTIC’s business, operating results and financial condition in fiscal 2021. Due to the international
reach of COVID-19, NTIC anticipates that its international joint ventures will continue to be adversely impacted by the
causes listed above, as well as other local issues that may arise, which will likely continue to have a material adverse
effect on NTIC’s joint venture operations and equity in income from joint ventures. It is currently not possible to
predict the precise potential impact, as well as the extent of any impact, of the COVID-19 pandemic on NTIC’s
business, and on the global economy as a whole. It is also currently not possible to predict how long the pandemic will
last or the time that it will take for economic activity to return to prior levels. A prolonged situation could have a
significant adverse effect on economies and financial markets globally, potentially deepening the current worldwide
economic downturn, which could have a significant adverse effect on NTIC’s business, operating results and financial
condition.

The extent to which the COVID-19 pandemic impacts NTIC’s business will likely depend on numerous evolving
factors that NTIC may not be able to accurately predict, including:

(cid:120)
(cid:120)

the duration and scope of the pandemic;
governmental, business and individuals’ actions that have been and continue to be taken in response to the
pandemic;
the impact of the pandemic on economic activity and actions taken in response;
the effect on NTIC’s customers and demand for its products and services;

(cid:120)
(cid:120)
(cid:120) NTIC’s ability to continue to manufacture and sell its products and services, including as a result of travel

restrictions and people working from home;
the ability of NTIC’s customers to pay for its products and services; and
any closures of NTIC’s facilities and the facilities of its customers and suppliers.

(cid:120)
(cid:120)

Any of these events could materially adversely affect NTIC’s business, operating results and financial condition. In
addition, the COVID-19 pandemic has already adversely affected and could continue to adversely affect NTIC’s stock
price.

Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or
otherwise, may negatively impact NTIC’s business, operating results, and financial condition.

There is significant uncertainty about the future relationship between the United States and other countries with respect
to trade policies, taxes, government regulations, and tariffs. The current U.S. administration has signaled support for
implementing and, in some instances, has already proposed or taken action with respect to major changes to certain
trade policies in an effort to encourage U.S. production. Such changes include the imposition of additional tariffs on
imported products in an effort to address trade imbalances, specifically with China, the withdrawal of the U.S. from the
Trans-Pacific Partnership, and the renegotiation of the North American Free Trade Agreement. In response to such
actions, certain countries have imposed retaliatory actions against the U.S. NTIC and its subsidiaries and joint ventures
engage in sales outside of the United States and is, therefore, negatively impacted by such actions. Any changes or
potential changes in trade policies in the United States, including changes stemming from the 2020 presidential election

in the United States, and the potential corresponding actions by other countries in which NTIC does business could
adversely and materially affect NTIC’s business, results of operations, and financial condition.

Risks Related to NTIC’s Financial Position and Need for Additional Capital

Changes to the London Interbank Offered Rate (LIBOR) or the replacement of LIBOR with an alternative reference
rate may require NTIC to renegotiate its revolving line of credit.

At the option of NTIC, outstanding advances under NTIC’s $3,000,000 revolving line of credit with PNC Bank,
National Association (PNC Bank) bear interest at either (a) an annual rate based on LIBOR plus 2.15% for the
applicable LIBOR interest period selected by NTIC or (b) at the rate publicly announced by PNC Bank from time to
time as its prime rate. On July 27, 2017, the Financial Conduct Authority in the United Kingdom announced that it
would phase out LIBOR as a benchmark by the end of 2021. If LIBOR ceases to exist, NTIC may need to renegotiate
its credit facility, and it may not be able to do so on terms that are favorable to NTIC. Further, the overall financial
market may be disrupted as a result of the phase-out or replacement of LIBOR. The U.S. Federal Reserve, in
conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial
institutions, is considering replacing LIBOR with the Secured Overnight Financing Rate (SOFR), a new index
calculated by short-term repurchase agreements, backed by Treasury securities. However, whether or not SOFR attains
market traction as a LIBOR replacement tool remains in question, and the future of LIBOR remains uncertain at this
time. The uncertainty related to the phase-out or replacement of LIBOR could disrupt the overall financial market and
adversely affect NTIC’s ability to renegotiate its revolving line of credit.

Global credit and financial markets in the past have experienced disruptions, including diminished liquidity and
credit availability and rapid fluctuations in market valuations, which, if they happen again, could negatively impact
NTIC’s business, operating results, and financial condition.

Any tightening of the credit and financial markets could negatively impact the ability of companies to borrow money
from their existing lenders, obtain credit from other sources, or raise financing to fund their operations. This could
negatively impact the ability of NTIC’s customers and the customers of NTIC’s joint ventures to purchase NTIC’s
products, suppliers’ ability to provide NTIC and its joint ventures with materials and components, and the ability of
NTIC and its joint ventures, distributors, and sales representatives to finance operations, if needed, on commercially
reasonable terms, or at all. Any or all of these events could negatively impact NTIC’s business, operating results, and
financial condition. Although NTIC maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers, distributors, and joint ventures to make required payments, and such losses historically have
been within NTIC’s expectations and the provisions established, NTIC cannot guarantee that it will continue to
experience the same loss rates that it has in the past, especially if there are weaknesses in the worldwide economy. A
significant change in the liquidity or financial condition of NTIC’s customers, distributors, or joint ventures could cause
unfavorable trends in NTIC’s receivable collections and additional allowances may be required, which could adversely
affect NTIC’s operating results. In addition, weaknesses in the worldwide economy, including the imposition of higher
tariffs and withdrawal from the Trans-Pacific Partnership, may adversely impact the ability of suppliers to provide
NTIC with materials and components, which could adversely affect NTIC’s business and operating results. NTIC is
unable to predict the prospects for a global economic recovery, but the longer the duration of such adverse and uncertain
economic conditions, the greater the risks NTIC faces in operating its business.

NTIC’s liquidity and financial position rely on the receipt of fees for services provided to its joint ventures and
dividend distributions from its joint ventures. No assurance can be provided that NTIC will continue to receive such
fees and dividend distributions in amounts NTIC historically has received or anticipates receiving.

NTIC conducts business, either directly or indirectly, through several joint venture arrangements that operate in North
America, Europe, and Asia. Each of these joint ventures manufactures, markets, and sells finished products in the
geographic territory that it is assigned. NTIC’s receipt of funds as a result of sales by its joint ventures is dependent
upon NTIC’s receipt of fees for services that NTIC provides to its joint ventures based primarily on the net sales of the
individual joint ventures and NTIC’s receipt of dividend distributions from its joint ventures based on the profitability
of its joint ventures. NTIC’s liquidity and financial position in part rely on NTIC’s receipt of fees for services that
NTIC provides to its joint ventures and dividend distributions from its joint ventures. During fiscal 2020, NTIC
recognized $4,612,885 in fees and $5,672,099 in dividend distributions from its joint ventures. Because NTIC owns
50% or less of each of its joint venture entities, NTIC does not control the decisions of these entities regarding whether

to pay dividends and, if paid, how much they should be in any given year. Thus, NTIC cannot guarantee that any of its
joint ventures will pay dividends in any given year. The failure of NTIC’s joint ventures to declare dividends or the
failure of NTIC to receive fees for services provided to joint ventures in amounts typically expected by NTIC could
adversely affect NTIC’s liquidity and financial position.

Since a significant portion of NTIC’s earnings results from NTIC’s equity income from joint ventures, and since
NTIC’s equity income from joint ventures varies from quarter to quarter, NTIC’s earnings are subject to quarterly
fluctuations.

A significant portion of NTIC’s earnings results from NTIC’s equity income from its joint ventures. NTIC’s equity in
income from joint ventures consists of NTIC’s share of equity in income from its joint ventures based on the overall
profitability of the joint ventures. Such profitability varies from quarter to quarter. Since NTIC’s management typically
receives quarterly joint venture financial information after the completion of each fiscal quarter, it is impossible for
NTIC’s management to cut costs and expenses to make up for any unanticipated shortfall in NTIC’s equity income from
joint ventures. Accordingly, the variability in NTIC’s equity income from joint ventures, in turn, subjects NTIC’s
earnings to quarterly fluctuations.

Out of NTIC’s joint ventures, NTIC’s joint venture in Germany is the most significant in terms of assets and income
to NTIC. If sales of NTIC’s products and services by this joint venture were to decline significantly or if NTIC’s
relationships with this joint venture were to deteriorate significantly, NTIC’s operating results likely would be
adversely affected.

NTIC considers its joint venture in Germany (EXCOR) to be individually significant to NTIC’s consolidated assets and
income and, therefore, provides certain additional information regarding EXCOR in the notes to NTIC’s consolidated
financial statements and in certain sections of this report, in addition to a few other entities for fiscal 2020. Of the total
equity in income from joint ventures of $4,270,327 during fiscal 2020, NTIC had equity in income from joint ventures
of $2,622,423 attributable to EXCOR. Of the total fee income for services provided to joint ventures of $4,612,885
during fiscal 2020, fees of $843,752 were attributable to EXCOR. Accordingly, if sales of NTIC’s products and
services by this joint venture were to decline significantly or if NTIC’s relationships with this joint venture were to
deteriorate significantly such that the joint venture terminated or was not motivated to sell NTIC’s products and
services, NTIC’s operating results likely would be adversely affected. While this is also true with respect to the other
joint venture entities of which additional information is provided in NTIC’s consolidated financial statements and in
certain other sections of this report, the significance is not as great as with EXCOR.

NTIC’s international business, which is conducted primarily through its subsidiaries and joint ventures, requires
management attention and financial resources and exposes NTIC to difficulties and risks presented by international
economic, political, legal, accounting, and business factors.

NTIC sells products and services directly, through its wholly-owned and majority-owned subsidiaries, and indirectly,
via a network of joint ventures, independent distributors, manufacturer’s sales representatives, and agents in over
60 countries, including countries in North America, South America, Europe, Asia, and the Middle East. One of NTIC’s
strategic objectives is the continued expansion of its international operations. The expansion of NTIC’s existing
international operations and entry into additional international markets requires management attention and financial
resources.

The sale and shipping of products and services across international borders subjects NTIC to extensive and complicated
U.S. and foreign governmental trade regulations. Compliance with such regulations is costly and exposes NTIC to
penalties for non-compliance. Other laws and regulations that can significantly impact NTIC include various anti-
bribery laws, including the U.S. Foreign Corrupt Practices Act, laws restricting business with suspected terrorists, and
anti-boycott laws. Any failure to comply with applicable legal and regulatory obligations could impact NTIC in a
variety of ways that include, but are not limited to, significant criminal, civil, and administrative penalties, including
imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, and restrictions on
certain business activities. Also, the failure to comply with applicable legal and regulatory obligations could result in
the disruption of NTIC’s shipping and sales activities.

Several factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements,
foreign policy changes between the U.S. and other countries, weakened international economic conditions, or the impact

of sovereign debt defaults by certain European countries, could adversely affect our international net sales.
Additionally, the expansion of our existing international operations and entry into additional international markets
require significant management attention and financial resources. In many of the countries in which NTIC sells its
products directly or indirectly through NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, Zerust Mexico,
Zerust Singapore, Zerust Vietnam and NTI Asean, its joint ventures, distributors, representatives, and agents are, to
some degree, subject to political, economic, and/or social instability. NTIC’s international operations expose NTIC and
its joint venture partners, distributors, representatives, and agents to risks inherent in operating in foreign jurisdictions.
These risks include:

(cid:120)

(cid:120)
(cid:120)
(cid:120)

difficulties in managing and staffing international operations and the required infrastructure costs, including
legal, tax, accounting, and information technology;
the imposition of additional U.S. and foreign governmental controls or regulations, new trade restrictions, and
restrictions on the activities of foreign agents, representatives, and distributors, the imposition of costly and
lengthy export licensing requirements and changes in duties and tariffs, license obligations, and other non-
tariff barriers to trade;
the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom
NTIC does business that would restrict or prohibit continued business with the sanctioned country, company,
person, or entity;
pricing pressure that NTIC or its joint ventures, distributors, representatives, and agents may experience
internationally;
laws and business practices favoring local companies;
adverse currency exchange rate fluctuations;
longer payment cycles and difficulties enforcing agreements and collecting receivables through certain foreign
legal systems;
national and international conflicts, including foreign policy changes or terrorist acts;
difficulties in enforcing or defending intellectual property rights;

(cid:120)
(cid:120)
(cid:120) multiple, changing, and often inconsistent enforcement of laws and regulations; and
(cid:120)

the potential payment of U.S. income taxes on certain earnings of joint ventures upon repatriation.

Furthermore, in June 2016, the United Kingdom held a referendum in which voters approved an exit from the European
Union, commonly referred to as “Brexit.” The United Kingdom officially terminated its membership of the European
Union on January 31, 2020 and will remain in a transition phase until December 31, 2020. The British government
continues to negotiate the terms of the United Kingdom’s future relationship with the European Union. Although it is
unknown what those terms will be, or whether an agreement will be reached, it is possible that there will be increased
regulatory complexities, which could affect NTIC’s ability to sell its products in certain European Union countries.
Brexit has created legal, political and economic uncertainty, which could subject NTIC to heightened risks in that
region, including disruptions to trade and free movement of goods, services, and people to and from the United
Kingdom, and increased foreign exchange volatility with respect to the British pound. NTIC does not know to what
extent these changes will impact its business. Any of these effects of Brexit, and other similar referenda that NTIC
cannot anticipate, could adversely affect its business, operations, and financial results.

Given NTIC’s limited resources, it may not effectively manage its growth.

NTIC’s strategy to grow its business, including in particular its ZERUST® rust and corrosion inhibiting products for the
oil and gas industry and its Natur-Tec® bio-plastic resin compounds and finished products, requires significant
management time and operational and financial resources. There is no assurance that NTIC has the necessary
operational and financial resources to manage its growth. This is especially true as it expands facilities and
manufactures its products on a larger commercial scale. In addition, rapid growth in NTIC’s headcount and operations
may place a significant strain on its management, administrative, operational, and financial infrastructure. Failure to
adequately manage its growth could have a material and adverse effect on NTIC’s business, operating results, and
financial condition. For example, NTIC’s soil side bottom solutions for tanks require implementation teams comprised
of both internal NTIC personnel and outside consulting firms. NTIC’s failure to expand these implementation teams to
service additional customers may limit NTIC’s ability to grow this business. In addition, NTIC may not be successful
in its strategy to grow its business.

Risks Related to the Foreign Markets in which NTIC Operates

The operations of NTIC China may be adversely affected by China’s evolving economic, political, and social
conditions.

The results of operations and future prospects of NTIC China may be adversely affected by, among other things,
changes in China’s political, economic, and social conditions, changes in the relationship between China and its western
trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of
existing laws and regulations, changes in foreign exchange regulations, measures that may be introduced to control
inflation, such as interest rate increases, and changes in the rates or methods of taxation. In addition, changes in
demand could result from increased competition with local Chinese manufacturers who have cost advantages or who
may be preferred suppliers for Chinese end users. Also, Chinese commercial laws, regulations, and interpretations
applicable to non-Chinese owned market participants, such as NTIC China, are continually changing. These laws,
regulations, and interpretations could impose restrictions on NTIC’s and NTIC China’s ownership or operations or
NTIC’s interests in China and could adversely affect NTIC’s business, results of operations, and financial condition.

Intellectual property rights are difficult to enforce in China, which could harm NTIC’s business, results of
operations, or financial condition.

Chinese commercial law is relatively undeveloped compared to commercial law in many of NTIC’s other major
markets, and limited protection of intellectual property is available in China as a practical matter. Although NTIC takes
precautions in the operation of NTIC China to protect NTIC’s intellectual property, any local manufacturer of products
that NTIC undertakes in China could subject NTIC to an increased risk that unauthorized parties will be able to copy or
otherwise obtain or use NTIC’s intellectual property, which could harm NTIC’s business. NTIC may also have limited
legal recourse in the event it encounters patent or trademark infringers, which could adversely affect NTIC’s business,
results of operations, and financial condition.

Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China.

NTIC China is subject to laws and regulations applicable to foreign investment in China. There are uncertainties
regarding the interpretation and enforcement of laws, rules, and policies in China. The Chinese legal system is based on
written statutes, and prior court decisions have limited precedential value. Because many laws and regulations are
relatively new, and the Chinese legal system is still evolving, the interpretations of many laws, regulations, and rules are
not always uniform. Moreover, the relative inexperience of China’s judiciary in many cases creates additional
uncertainty as to the outcome of any litigation, and the interpretation of statutes and regulations may be subject to
government policies reflecting domestic political agendas. Finally, enforcement of existing laws or contracts based on
existing law may be uncertain and sporadic. For the preceding reasons, it may be difficult for NTIC or NTIC China to
obtain timely or equitable enforcement of laws ostensibly designed to protect companies like NTIC or NTIC China,
which could adversely affect NTIC’s business, results of operations, and financial condition.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject NTIC to, among other things, penalties
and legal expenses that could harm its reputation and have a material adverse effect on its business, results of
operations, and financial condition.

NTIC is subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits covered entities and
their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of
obtaining or retaining business or other benefits. In addition, the FCPA imposes accounting standards and requirements
on U.S. publicly-traded corporations and their foreign affiliates, which are intended to prevent the diversion of corporate
funds to the payment of bribes and other improper payments and to prevent the establishment of “off books” slush funds
from which such improper payments can be made. NTIC also is subject to similar anticorruption legislation
implemented in Europe under the Organization for Economic Co-operation and Development’s Convention on
Combating Bribery of Foreign Public Officials in International Business Transactions. NTIC and its joint ventures,
distributors, independent representatives, and agents operate in a number of jurisdictions that pose a high risk of
potential violations of the FCPA and other anticorruption laws, based on measurements such as Transparency
International’s Corruption Perception Index, and NTIC utilizes a number of joint ventures, distributors, independent
representatives, and agents for whose actions NTIC could be held liable under the FCPA. NTIC informs its personnel,
joint ventures, distributors, independent representatives, and agents of the requirements of the FCPA and other

anticorruption laws, including, but not limited to, their reporting requirements. NTIC also has developed and will
continue to develop and implement systems for formalizing its contracting processes, performing due diligence on
agents, and improving its recordkeeping and auditing practices regarding these regulations. However, there is no
guarantee that NTIC’s employees, joint ventures, distributors, independent representatives, or other agents have not or
will not engage in conduct undetected by NTIC’s processes and for which NTIC might be held responsible under the
FCPA or other anticorruption laws.

If NTIC’s employees, joint ventures, distributors, third-party sales representatives, or other agents are found to have
engaged in such practices, NTIC could suffer severe penalties, including criminal and civil penalties, disgorgement, and
other remedial measures, including further changes or enhancements to its procedures, policies, and controls and
potential personnel changes and disciplinary actions.

Certain private and foreign companies, including some of NTIC’s competitors, are not subject to prohibitions as strict as
those under the FCPA or, even if subjected to strict prohibitions, such prohibitions may be laxly enforced in practice. If
NTIC’s competitors engage in corruption, extortion, bribery, pay-offs, theft, or other fraudulent practices, they may
receive preferential treatment from personnel of some companies or from government officials, giving NTIC’s
competitors an advantage in securing business and putting NTIC at a disadvantage.

Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and changes in NTIC’s
foreign currency translation adjustments.

Because the functional currency of NTIC’s foreign operations is the applicable local currency, NTIC is exposed to
foreign currency exchange rate risk arising from transactions in the normal course of business. NTIC’s principal
exchange rate exposure is with the Euro, the Japanese Yen, the Indian Rupee, the Chinese Renminbi, the South Korean
Won, and the English Pound against the U.S. dollar. NTIC’s fees for services provided to its joint ventures and
dividend distributions from these foreign entities are paid in foreign currencies; thus, fluctuations in foreign currency
exchange rates could result in declines in NTIC’s earnings. Any changes in foreign currency exchange rates would be
reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint
ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency
exchange rate risk.

Economic uncertainty in developing markets could adversely affect NTIC’s revenue and earnings.

NTIC conducts business, or is contemplating expansion, in developing markets with economies that tend to be more
volatile than those in the United States and Western Europe. The risk of doing business in developing markets such as
China, Brazil, India, Russia, the United Arab Emirates, Mexico, and other economically volatile areas could adversely
affect NTIC’s operations and earnings. Such risks include the financial instability among customers in these regions,
political instability, fraud or corruption, and other non-economic factors, such as the impact of the COVID-19 pandemic
and irregular trade flows that need to be managed successfully with the help of the local governments. In addition,
commercial laws in some developing countries can be vague, inconsistently administered, and retroactively applied. If
NTIC is deemed not to be in compliance with applicable laws in developing countries where NTIC conducts business,
its prospects and business in those countries could be harmed, which could then have a material adverse impact on
NTIC’s operating results and financial position. NTIC’s failure to successfully manage economic, political, and other
risks relating to doing business in developing countries and economically and politically volatile areas could adversely
affect its business.

Risks Related to NTIC’s Products

NTIC faces intense competition in almost all of its product lines, including from competitors that have substantially
greater resources than NTIC does. No assurance can be provided that NTIC will be able to compete effectively,
which would harm its business and operating results.

NTIC’s products are sold in intensely competitive markets throughout the world. This intense competition could result
in pricing pressures, lower sales, reduced margins, and lower market share. With respect to its rust and corrosion
inhibiting products, NTIC competes on the basis of product innovation, quality, reliability, product support, customer
service, reputation, and price. With respect to its Natur-Tec® resin compounds and finished products, NTIC competes
on the basis of performance, brand awareness, distribution network, product availability, product offering, shelf life,

place of manufacture, and price. NTIC often competes with numerous manufacturers, many of which have substantially
greater financial, marketing, and other resources than NTIC. As a result, they may be able to adapt more quickly than
NTIC to new or emerging technologies, industry trends, and changes in customer requirements or to devote greater
resources to the promotion and sale of their products than NTIC. In addition, competition could increase if new
companies enter the markets in which NTIC competes, especially when the barriers to entry are low, which may be true
with respect to NTIC’s rust and corrosion prevention business, or if existing competitors expand their product lines or
intensify efforts within existing product lines. NTIC’s current products, products under development, and its ability to
develop new and improved products may be insufficient to enable NTIC to compete effectively with its competitors.
No assurance can be provided that NTIC will be able to compete effectively, which would harm its business and
operating results. In particular, NTIC has experienced more intense competition with respect to many of its traditional
ZERUST® rust and corrosion inhibiting products and services, which has led to decreased pricing and smaller margins
for NTIC. Recently, NTIC has experienced lower margins on its contracts with Chinese automotive customers. NTIC
anticipates that such intense competition likely will continue and that new competitors may emerge, including plastic
extrusion companies, which would continue to adversely affect NTIC’s operating results.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of NTIC’s net
sales and the net sales of NTIC’s joint ventures. Accordingly, if sales of these products and services were to decline,
NTIC’s operating results would be adversely affected.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of NTIC’s net sales
and the net sales of NTIC’s joint ventures. During fiscal 2020, 72.4% of NTIC’s consolidated net sales were derived
from sales of ZERUST® rust and corrosion inhibiting products and services. While the net sales of NTIC’s joint
ventures are not included in NTIC’s net sales on NTIC’s consolidated financial statements, NTIC’s receipt of fees for
services that NTIC provides to its joint ventures and NTIC’s receipt of dividend distributions from its joint ventures are
based primarily on the revenues and profitability of the joint ventures. Accordingly, if sales of these products and
services were to decline due to increased competition, the introduction of a new disruptive technology, or otherwise,
NTIC’s operating results would be adversely affected.

If NTIC is unable to continue to enhance its existing products and develop and market new products that respond to
customer needs and achieve market acceptance, NTIC may experience a decrease in demand for its products, and its
business could suffer.

One of NTIC’s strategies is to enhance its existing products and develop and market new products that respond to
customer needs. NTIC may not be able to compete effectively with its competitors unless NTIC can keep up with
existing or new products or alternative technologies in the markets in which it competes. Product development requires
significant research and development, financial, and other resources. Although in the past NTIC has implemented lean
manufacturing and other productivity improvement initiatives to provide investment funding for new products, no
assurance can be provided that NTIC will be able to continue to do so in the future. Product improvements and new
product introductions also require significant planning, design, development, and testing at the technological, product,
and manufacturing process levels, and NTIC may not be able to timely develop product improvements or new products.
NTIC’s competitors’ new products may beat NTIC’s products to market, may be more effective or less expensive than
NTIC’s products, or may render NTIC’s products obsolete. Any new products that NTIC may develop may not receive
market acceptance or otherwise generate any meaningful net sales or profits for NTIC relative to its expectations, based
on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund
advertising, marketing, promotional programs, and research and development.

NTIC has invested and intends to continue to invest additional research and development and marketing efforts and
resources into the application of its corrosion prevention solutions into the oil and gas industry and the continued
launch of its Natur-Tec® resin compounds and finished products. No assurance can be provided, however, that
NTIC’s investments in these new markets and products will be successful and result in additional revenue to NTIC.

In an effort to increase net sales, NTIC has expanded the marketing of its corrosion prevention solutions into the oil and
gas industry and its Natur-Tec® resin compounds and finished products. NTIC expects to continue to invest additional
research and development and marketing efforts and resources into these strategic initiatives. No assurance can be
provided, however, that such strategic initiatives will be successful or that NTIC will be successful in obtaining
additional revenue as a result of them. The introduction of new products into new markets takes significant resources,
and there can be no assurance that NTIC is dedicating a sufficient amount of resources to ensure the success of these

strategic initiatives. The sale of NTIC’s ZERUST® rust and corrosion inhibiting products and services into the oil and
gas industry, in particular, typically involves a long sales cycle, often including a one- to multi-year trial period with
each customer and a slow integration process thereafter. This long sales cycle may cause NTIC’s management,
stockholders, and investors to lose faith in the business opportunities for NTIC’s ZERUST® rust and corrosion
inhibiting products and services in the oil and gas industry.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued launch of
NTIC’s Natur-Tec® resin compounds and finished products may require additional capital in the future, which may
not be available or may be available only on unfavorable terms. In addition, any equity financings may be dilutive to
NTIC’s stockholders.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued expansion of
NTIC’s Natur-Tec® resin compounds and finished products will continue to require resources during fiscal 2021 and
beyond. To the extent that NTIC’s existing capital, including amounts available under its revolving line of credit, is
insufficient to meet these requirements, NTIC may raise additional capital through financings or additional borrowings.
Any equity or debt financing, if available at all, may be on terms that are not favorable to NTIC, and any equity
financings could result in dilution to NTIC’s stockholders.

NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the
expansion of its Natur-Tec® bioplastics resin compounds and finished products is risky and may not prove to be
successful, which could harm NTIC’s operating results and financial condition.

NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the
expansion of its Natur-Tec® bioplastics resin compounds and finished products, either directly or indirectly through
joint ventures and independent distributors and agents, is risky and subject to all of the risks inherent in the
establishment of a new business enterprise, including:

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the absence of a significant operating history;
the lack of commercialized products;
the lack of market acceptance of new products;
expected substantial and continual losses for such businesses for the foreseeable future;
the lack of manufacturing experience and limited marketing experience;
an expected reliance on third parties for the manufacture and commercialization of some of the products;
a competitive environment characterized by numerous, well-established and well-capitalized competitors;
insufficient capital and other resources; and
reliance on key personnel.

NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC’s ability to
fill its customers’ orders.

NTIC utilizes contract manufacturers for a significant portion of its production requirements. The majority of NTIC’s
manufacturing is conducted in the United States by contract manufacturers that also perform services for numerous
other companies. NTIC does not have a guaranteed level of production capacity with any of its contract manufacturers.
Qualifying new contract manufacturers is time consuming and might result in unforeseen manufacturing and operations
problems. The loss of NTIC’s relationships with its contract manufacturers or their inability to conduct their
manufacturing and assembly services for NTIC as anticipated in terms of capacity, cost, quality, and timeliness could
adversely affect NTIC’s ability to fill customer orders in accordance with required delivery, quality, and performance
requirements, thus adversely affecting NTIC’s net sales and other operating results.

NTIC’s dependence on manufacturing and logistical services provided by contractors could give rise to product
defect or warranty liability.

NTIC uses third party manufacturers to produce the majority of its products. In addition, NTIC relies upon certain
contractors for logistical services. Although NTIC’s arrangements with its contract manufacturers and contractors may
contain provisions for warranty expense reimbursement, NTIC may remain responsible to its customers for warranty

service in the event of product defects and could experience an unanticipated product defect or warranty liability. In
addition, product defects could harm NTIC’s reputation amongst its customers.

NTIC’s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products, which
could reduce its net sales and adversely affect its operating results and harm its reputation.

NTIC relies on suppliers for certain raw materials and components used in its products. For reasons of quality
assurance, cost effectiveness, or availability, NTIC procures certain raw materials and components from sole or limited
source suppliers. Among the limited source suppliers NTIC does business with are the manufacturers of plastic resins
used in Natur-Tec® products. NTIC generally acquires these and other raw materials and components through purchase
orders placed in the ordinary course of business, and as a result, NTIC does not have a significant inventory of these
materials and components and does not have any guaranteed or contractual supply arrangements with many of these
suppliers for these materials and components. NTIC’s dependence on third-party suppliers involves several risks,
including limited control over pricing, availability, quality, and delivery schedules, as well as manufacturing yields and
costs. Suppliers of such raw materials and components may decide, or be required, for reasons beyond NTIC’s control,
to cease supplying such raw materials and components to NTIC or to raise their prices.

Shortages of raw materials, quality control problems, production capacity constraints, or delays by suppliers could
negatively affect NTIC’s ability to meet its production obligations and result in increased prices for affected parts. For
example, the rapid growth in demand for bioplastics products globally has increased the demand and the price for
plastic resins, and limited suppliers of such plastic resins may experience shortages caused by demand outpacing their
production capabilities, which could result in NTIC’s inability to produce its Natur-Tec® products promptly or in the
volumes demanded. These and other shortages, constraints, or delays may result in delays in shipments of products or
components, which could adversely affect NTIC’s net sales and other operating results and its reputation. From time to
time, materials and components used in NTIC’s products are subject to allocation because of shortages of these
materials and components.

Increases in prices for raw materials and components used in NTIC’s products could adversely affect NTIC’s
operating results.

NTIC uses certain raw materials and components in its products, including in particular plastic resins, which are subject
to price increases. In light of increased global demand for bioplastics, the prices of certain plastic resins have increased,
which could adversely affect gross margins on NTIC’s Natur-Tec® products. Additionally, changes to international
trade agreements could result in additional tariffs, duties, or other charges on raw materials or components we import
into the U.S. Increases in prices for raw materials and components used in NTIC’s products could adversely affect
NTIC’s gross margins and other operating results.

The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the widespread
market acceptance of products manufactured with bio-based and biodegradable resins.

Although there is a developed market for petroleum-based plastics, the market for “bioplastics” which are plastics
produced with bio-based resins, which are derived from renewable resources such as corn or cellulosic/plant material or
blends thereof, or plastics that are engineered to be fully biodegradable or both, is still developing. The commercial
success of NTIC’s Natur-Tec® resin compounds and finished products depends on the widespread market acceptance of
products manufactured with bio-based and biodegradable resins. It is currently difficult to assess or predict with any
assurance the potential size, timing, and viability of market opportunities for NTIC’s Natur-Tec® resin compounds and
finished products. The traditional plastics market sector is well-established with entrenched competitors with whom
NTIC competes. Pricing for traditional plastics has been highly volatile in recent years, which drives, to some extent,
the commercial and other support for bioplastics. While NTIC expects to be able to command a premium price for its
Natur-Tec® resin compounds and finished products, a widening gap in the pricing for bioplastics versus petroleum-
based plastics may reduce the size of the addressable market for NTIC’s Natur-Tec® resin compounds and finished
products. In addition, the growth of the market will create some pressure on price for applications today considered
commodities, including in particular NTIC’s current Natur-Tec® finished products.

NTIC relies on its joint ventures, distributors, manufacturer’s sales representatives, and other agents to market and
sell its products.

In addition to its direct sales force, NTIC relies on its joint ventures, distributors, manufacturer’s sales representatives,
and other agents to market and sell its products in the United States and internationally. NTIC’s joint ventures,
distributors, manufacturer’s sales representatives, and other agents might terminate their relationship with NTIC or
devote insufficient sales efforts to NTIC’s products. NTIC does not control its joint ventures, distributors,
manufacturer’s sales representatives, and other agents, and they may not be successful in implementing NTIC’s
marketing plans. NTIC’s failure to maintain its existing relationships with these entities, or its failure to recruit and
retain additional skilled joint venture partners, distributors, manufacturer’s sales representatives, and other agents, could
have an adverse effect on NTIC’s operations. It is anticipated that several of NTIC’s joint venture partners will retire
during the next several years, which will require a transition on the part of the joint venture as well as NTIC and could
harm NTIC’s relationship with the joint venture and NTIC’s business.

NTIC may be subject to product liability claims or other claims arising out of the activities of its joint ventures,
which could adversely affect NTIC and its business.

While NTIC is not aware of any specific potential risk beyond its initial investment in, and any undistributed earnings
of, each of its joint ventures, there can be no assurance that NTIC will not be subject to lawsuits based on product
liability claims or other claims arising out of the activities of its joint ventures. To mitigate the ramifications of such an
occurrence, NTIC maintains liability insurance specifically applicable to its ownership positions in its joint venture
arrangements in excess of any insurance the joint ventures may maintain. No assurance can be provided, however, that
such insurance will be available or adequate in the event of a claim.

The sale of ZERUST® rust and corrosion inhibiting products into the oil and gas industry is risky in light of the
hazards typically associated with such operations and the significant amount of potential liability involved, which
could adversely affect NTIC’s business if ZERUST® rust and corrosion inhibiting products are involved, even if the
cause of such events was not related to NTIC’s products.

Because NTIC sells its ZERUST® rust and corrosion inhibiting products into the oil and gas industry, NTIC is subject to
some of the risks and hazards typically associated with such operations, including hazards such as fire, explosion,
blowouts, cratering, unplanned gas releases, and spills, each of which could be claimed to be attributed to the failure of
NTIC’s products to perform as anticipated. If such events occur and NTIC’s products are involved, NTIC’s business
and operating results may suffer, even if the cause of such events was not related to NTIC’s products.

The sale of ZERUST® rust and corrosion inhibiting products into the oil and gas industry is somewhat seasonal and
dependent upon oil prices.

In the past, NTIC has experienced some seasonality with respect to the sale of its ZERUST® rust and corrosion
inhibiting products into the oil and gas industry, with sales during parts of the second and third fiscal quarters being
adversely affected by winter in the United States. In addition, the sale of NTIC’s ZERUST® rust and corrosion
inhibiting products into the oil and gas industry, particularly in the United States, has been and may continue to be
hampered by low global crude oil prices. Low global crude oil prices have recently been caused by oversupply, price
wars between Saudi Arabia and Russia and the impact of the COVID-19 pandemic. NTIC believes low global crude oil
prices constrain capital improvement budgets of its existing and prospective customers and may result in personnel
turnover at its oil and gas customers or prospects.

Risks Related to Governmental Regulation, Laws, and Compliance

NTIC’s business, properties, and products are subject to governmental regulation and taxes, compliance with which
may require NTIC to incur expenses or modify its products or operations, and which may expose NTIC to penalties
for non-compliance. Governmental regulation also may adversely affect the demand for some of NTIC’s products
and its operating results.

NTIC’s business, properties, and products are subject to a wide variety of international, federal, state, and local laws,
rules, taxes, and regulations relating to the protection of the environment, natural resources, and worker health and
safety and the use, management, storage, and disposal of hazardous substances, wastes, and other regulated materials.

These laws, rules, and regulations may affect the way NTIC conducts its operations, and the failure to comply with
these regulations could lead to fines and other penalties. Because NTIC owns and operates real property, various
environmental laws also may impose liability on NTIC for the costs of cleaning up and responding to hazardous
substances that may have been released on NTIC’s property, including releases unknown to NTIC. These
environmental laws and regulations also could require NTIC to pay for environmental remediation and response costs at
third-party locations where NTIC disposed of or recycled hazardous substances. NTIC’s future costs of complying with
the various environmental requirements, as they now exist or may be altered in the future, could adversely affect
NTIC’s financial condition and operating results. NTIC is also subject to other international, federal, and state laws,
rules, and regulations, the future non-compliance with which may harm NTIC’s business or may adversely affect the
demand for some of its products. Changes in laws and regulations, including changes in accounting standards and
taxation changes, including tax rate changes, new tax laws, and revised tax law interpretations, also may adversely
affect NTIC’s operating results.

Fluctuations in NTIC’s effective tax rate could have a significant impact on NTIC’s financial position, results of
operations, or cash flows.

The mix of pre-tax income or loss among the tax jurisdictions in which NTIC operates, which have varying tax rates,
could impact NTIC’s effective tax rate. NTIC is subject to income taxes as well as non-income based taxes in both the
United States and various foreign jurisdictions. Judgment is required in determining the worldwide provision for
income taxes, other tax liabilities, interest, and penalties. Future events could change management’s assessment. NTIC
operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions. These audits can involve
complex issues, which may require an extended period of time to resolve. NTIC also has made assumptions about the
realization of deferred tax assets. Changes in these assumptions or jurisdictional regulations could result in a valuation
allowance for these assets. Final determination of tax audits or tax disputes may be different from what is currently
reflected by NTIC’s income tax provisions and accruals. During fiscal year 2020, NTIC recorded income tax expense of
approximately $1,600,000 related to the determination that it was more likely than not that all or some of NTIC’s
deferred tax assets would not be realized.

Certain of NTIC’s operations are subject to regulation by the U.S. Food and Drug Administration.

The manufacture, sale, and use of NTIC’s Natur-Tec® bio-plastic resin compounds are subject to regulation by the
U.S. FDA. The FDA’s regulations are concerned with substances used indirectly in food packaging materials, not with
specific finished food packaging products. Thus, food and beverage containers are in compliance with FDA regulations
if the components used in the food and beverage containers: (i) are approved by the FDA as indirect food additives for
their intended uses and comply with the applicable FDA indirect food additive regulations; or (ii) are generally
recognized as safe for their intended uses and are of suitable purity for those intended uses. NTIC believes that its
Natur-Tec® resin compounds comply with all FDA requirements. However, failure to comply with FDA regulations
could subject NTIC to administrative, civil, or criminal penalties.

NTIC’s reliance upon patents, trademark laws, trade secrets, and contractual provisions to protect its proprietary
rights may not be sufficient to protect its intellectual property from others who may sell similar products.

NTIC holds patents relating to various aspects of its products and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to NTIC’s products are protected from unauthorized use by
third parties only to the extent that they are covered by valid and enforceable patents or are maintained in confidence as
trade secrets. NTIC cannot be certain that it will be issued any patents from any pending or future patent applications
owned by or licensed to NTIC or that the claims allowed under any issued patents will be sufficiently broad to protect
its technology. In the absence of patent protection, NTIC may be vulnerable to competitors who attempt to copy
NTIC’s products or gain access to its trade secrets and know-how. NTIC’s competitors may initiate litigation to
challenge the validity of NTIC’s patents, or they may use their resources to design comparable products that do not
infringe NTIC’s patents. NTIC may incur substantial costs if its competitors initiate litigation to challenge the validity
of its patents or if it initiates any proceedings to protect its proprietary rights, and if the outcome of any such litigation is
unfavorable to NTIC, its business and operating results could be materially adversely affected.

In addition, NTIC relies substantially on trade secrets and proprietary know-how that it seeks to protect, in part, by
confidentiality agreements with its employees and consultants. These agreements may be breached, and NTIC may not

have adequate remedies for any such breach. Even if these confidentiality agreements are not breached, NTIC’s trade
secrets may otherwise become known or be independently developed by competitors.

NTIC’s compliance with accounting principles generally accepted in the United States of America and any changes
in such principles might adversely affect NTIC’s operating results and financial condition. Any requirement to
consolidate NTIC’s joint ventures could adversely affect NTIC’s operating results and financial condition.

If there were a change in accounting rules and NTIC were required to fully consolidate its joint ventures or if NTIC’s
joint ventures otherwise would be required to be consolidated with NTIC, NTIC and the individual joint venture would
incur significant additional costs. In addition, other accounting pronouncements issued in the future could have a
material cost associated with NTIC’s implementation of such new accounting pronouncements.

Risks Related to NTIC’s Common Stock

The trading volume of NTIC’s common stock is typically very low, leaving NTIC’s common stock open to risk of
high volatility.

The number of shares of NTIC’s common stock being traded daily is often very low, and on some trading days, there is
no trading volume at all. During fiscal 2020, the daily trading volume ranged from 100 shares to 203,000 shares. Any
NTIC stockholder wishing to sell his, her, or its stock may cause a significant fluctuation in the trading price of NTIC’s
common stock. In addition, low trading volume of a stock increases the possibility that, despite rules against such
activity, the price of the stock may be manipulated by persons acting in their own self-interest. NTIC may not have
adequate market makers and market making activity to prevent manipulation in its common stock.

The price and trading volume of NTIC’s common stock has been, and may continue to be, volatile.

The market price and trading volume of NTIC’s common stock price historically has fluctuated over a wide range.
During fiscal 2020, the sale price of NTIC’s common stock ranged from a low of $4.70 per share to a high of $14.88 per
share, and the daily trading volume ranged from 100 shares to 203,000 shares. It is likely that the price and trading
volume of NTIC’s common stock will continue to fluctuate in the future. The securities of small capitalization
companies, including NTIC, from time to time experience significant price and volume fluctuations, often unrelated to
the operating performance of these companies. Securities class action litigation is sometimes brought against a
company following periods of volatility in the market price of its securities or for other reasons. NTIC may become the
target of similar litigation, especially if NTIC fails to meet its annual projected financial guidance or lowers its annual
projected financial guidance. Securities litigation, whether with or without merit, could result in substantial costs and
divert management’s attention and resources, which could harm NTIC’s business, operating results, and financial
condition as well as the market price of its common stock.

A large percentage of NTIC’s outstanding common stock is held by insiders, and, as a result, the trading market for
NTIC’s common stock is not as liquid as the stock of other public companies.

As of November 9, 2020, NTIC had 9,104,636 shares of common stock outstanding, 21.4% of which were beneficially
owned by directors, executive officers, principal stockholders, and their respective affiliates. The stock of companies
with a substantial amount of stock held by insiders is usually not as liquid as the stock of other public companies where
insider ownership is not as concentrated. Thus, the trading market for shares of NTIC’s common stock may not be as
liquid as the stock of other public companies.

If securities or industry analysts do not publish research or reports about NTIC’s business, or if they adversely
change their recommendations regarding NTIC’s common stock, the market price for NTIC’s common stock and
trading volume could decline.

The trading market for NTIC’s common stock has been influenced by research or reports that industry or securities
analysts publish about NTIC or its business. If one or more analysts who cover NTIC downgrade NTIC’s common
stock, the market price for NTIC’s common stock would likely decline. If one or more cease coverage of NTIC or fail
to regularly publish reports on NTIC, NTIC could lose visibility in the financial markets, which, in turn, could cause the
market price or trading volume for NTIC’s common stock to decline.

One of NTIC’s principal stockholders beneficially owns a significant percentage of NTIC’s outstanding common
stock and is affiliated with NTIC’s President and Chief Executive Officer and, thus, may be able to influence matters
requiring stockholder approval, including the election of directors, and could discourage or otherwise impede a
transaction in which a third party wishes to purchase NTIC’s outstanding shares at a premium.

As of November 9, 2020, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately 13.2% of
NTIC’s outstanding common stock. Inter Alia is an entity partially owned by G. Patrick Lynch, NTIC’s President and
Chief Executive Officer and director, as well as two other members of the Lynch family. Mr. Lynch shares voting and
dispositive power of shares of NTIC’s common stock held by Inter Alia with the other owners. As a result of his share
ownership through Inter Alia and his position as President and Chief Executive Officer and director of NTIC,
Mr. Lynch may be able to influence the affairs and actions of NTIC, including matters requiring stockholder approval,
such as the election of directors and approval of significant corporate transactions. The interests of Mr. Lynch and Inter
Alia may differ from the interests of NTIC’s other stockholders. This concentration of ownership may have the effect
of delaying, preventing, or deterring a change in control of NTIC, could deprive NTIC’s stockholders of an opportunity
to receive a premium for their common stock as part of a sale or merger of NTIC, and may negatively affect the market
price of NTIC’s common stock. Transactions that could be affected by this concentration of ownership include proxy
contests, tender offers, mergers, or other purchases of common stock that could give stockholders the opportunity to
realize a premium over the then-prevailing market price for shares of NTIC’s common stock.

General Risk Factors

Severe weather could have a material adverse effect on our business.

NTIC’s business could be materially and adversely affected by severe weather. NTIC’s customers, including in
particular NTIC’s oil and gas customers, may have operations located in parts of the southern United States or other
places and may be adversely affected by hurricanes and tropical storms, resulting in reduced demand for NTIC’s
products and services or increased operating costs. Furthermore, NTIC’s customers and raw material suppliers’
operations may be adversely affected by such hurricanes and other extreme or seasonal weather conditions. Adverse
weather can also directly impede NTIC’s operations. Repercussions of severe weather conditions may include:

curtailment of services or reduced demand for products;

(cid:120)
(cid:120) weather-related damage to facilities and equipment, resulting in suspension of operations;
(cid:120)

inability to deliver equipment, personnel and products to job sites in accordance with contract schedules or
increased transportation or other operating costs; and
loss of productivity.

(cid:120)

These constraints could delay NTIC’s operations and materially increase NTIC’s operating and capital costs.

NTIC has limited staffing and will continue to be dependent upon key employees.

NTIC’s success is dependent upon the efforts of a small management team and group of employees. NTIC’s future
success will depend in large part on its ability to retain its key employees and identify, attract, and retain other highly
qualified managerial, technical, research and development, sales and marketing, and customer service personnel when
needed. Competition for these individuals may be intense, especially in the markets in which NTIC operates. NTIC
may not succeed in identifying, attracting, and retaining these personnel. Inadequate performance by any of NTIC’s
limited staff could have a negative impact on the performance of the company. In addition, none of NTIC’s employees
have any contractual obligation to maintain his or her employment with NTIC. The loss or interruption of services of
any of NTIC’s key personnel, including in particular its technical personnel, the inability to identify, attract, or retain
qualified personnel in the future, delays in hiring qualified personnel, or any employee slowdowns, strikes, or similar
actions could make it difficult for NTIC to manage its business and meet key objectives, which could harm NTIC’s
business, operating results, and financial condition.

NTIC may grow its business through additional joint ventures, subsidiaries, alliances, and acquisitions, which could
be risky and harm its business.

One of NTIC’s growth strategies may be to expand its business by entering into additional joint ventures and alliances
and acquiring businesses, technologies, and products that complement or augment NTIC’s existing products. The
benefits of a joint venture, alliance, or acquisition may take more time than expected to develop, and NTIC cannot
guarantee that any future joint ventures, alliances, or acquisitions will in fact produce the intended benefits. In addition,
joint ventures, alliances, and acquisitions involve a number of risks, including:

(cid:120)
(cid:120)

(cid:120)

diversion of management’s attention;
difficulties in assimilating the operations and products of a new joint venture or acquired business or in
realizing projected efficiencies, cost savings, and revenue synergies;
potential loss of key employees or customers of the new joint venture or acquired business or adverse effects
on existing business relationships with suppliers and customers;
adverse impact on overall profitability if the new joint venture or acquired business does not achieve the
financial results projected in NTIC’s valuation models;
reallocation of amounts of capital from other operating initiatives and/or an increase in NTIC’s leverage and
debt service requirements to pay the joint venture capital contribution or the acquisition purchase price, which
could in turn restrict NTIC’s ability to access additional capital when needed or to pursue other important
elements of NTIC’s business strategy;
inaccurate assessment of undisclosed, contingent, or other liabilities or problems and unanticipated costs
associated with the new joint venture or acquisition; and
incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, and write-off
of significant amounts of goodwill that could adversely affect NTIC’s operating results.

NTIC’s ability to grow through joint ventures, alliances, and acquisitions will depend, in part, on the availability of
suitable opportunities at an acceptable cost, NTIC’s ability to compete effectively for these opportunities, and the
availability of capital to complete such transactions.

NTIC relies on its management information systems for inventory management, distribution, and other functions. If
these information systems fail to adequately perform these functions or if NTIC experiences an interruption in their
operation, NTIC’s business and operating results could be adversely affected.

The efficient operation of NTIC’s business is dependent on its management information systems. NTIC relies on its
management information systems to effectively manage accounting and financial functions; manage order entry, order
fulfillment, and inventory replenishment processes; and to maintain its research and development data. The failure of
management information systems to perform as anticipated could disrupt NTIC’s business and product development
and could result in decreased sales, causing NTIC’s business and operating results to suffer. In addition, NTIC’s
management information systems are vulnerable to damage or interruption from natural or man-made disasters,
including terrorist attacks, attacks by computer viruses or hackers, power loss to computer systems, Internet outages,
and telecommunications or data network failure. Any such interruption could adversely affect NTIC’s business and
operating results.

NTIC’s business could be negatively impacted by cyber security threats.

In the ordinary course of NTIC’s business, NTIC uses its management information systems to store and access
proprietary business information. NTIC faces various cyber security threats, including cyber security attacks to its
information technology infrastructure and attempts by others to gain access to its proprietary or sensitive information.
The procedures and controls NTIC uses to monitor these threats and mitigate its exposure may not be sufficient to
prevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities,
misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of
additional security protective measures, litigation, and reputational damage. Any remedial costs or other liabilities
related to cyber security incidents may not be fully insured or indemnified by other means.

NTIC’s quarterly results are typically unpredictable and subject to variation.

NTIC’s quarterly operating results vary from quarter to quarter for a variety of reasons. For example, NTIC’s quarterly
sales to joint ventures can be affected by individual orders to joint ventures. Because of the typical size of individual
orders to joint ventures and the overall size of NTIC’s net sales to joint ventures, the timing of one or more orders can
materially affect NTIC’s quarterly sales to joint ventures and the comparisons to prior year quarters. In addition,
because of the typical size of individual orders and the overall size of NTIC’s net sales derived from sales of Natur-
Tec® products, the timing of one or more orders can materially affect NTIC’s quarterly sales of Natur-Tec® products
and the comparisons to prior year quarters. Furthermore, since ZERUST® products for the oil and gas industry typically
carry higher margins than other traditional ZERUST® products, the amount of sales of ZERUST® products for the oil
and gas industry typically affects NTIC’s overall margins. Such variability in operating results makes the prediction of
NTIC’s net sales, earnings, and other operating results for each quarter difficult and increases the risk of unanticipated
variations in quarterly operating results. NTIC’s quarterly results have been and, in the future, may be below the
expectations of public market analysts and investors.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s operating
results, financial condition, or business.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s operating results,
and financial condition, such as natural or man-made disasters, an unexpected business loss of supply due to a force
majeure event or global pandemics that may result in shortages of raw materials, higher commodity costs, an increase in
insurance premiums, and other adverse effects on NTIC’s business; the continued threat of terrorist acts and war that
may result in heightened security and higher costs for import and export shipments of components or finished goods;
and the ability of NTIC’s management to adapt to unplanned events.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES

NTIC’s principal executive offices, production facilities, and domestic research and development operations are located
at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC owns this real estate and building. NTIC also owns
real estate and a building in Beachwood, Ohio, which it uses for office, manufacturing, laboratory, and warehouse
space. Additionally, NTIC has contract warehousing agreements in California and Indiana to hold and release stock
products to customers. NTIC’s subsidiaries in Brazil, India, Mexico, and China all lease office, warehouse, and
laboratory space. NTIC’s management considers its current properties suitable and adequate for its current and
foreseeable needs.

Item 3.

LEGAL PROCEEDINGS

For information regarding NTIC’s legal proceedings, see Note 15 to NTIC’s Consolidated Financial Statements.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 4A.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The two individuals named below have been designated by NTIC’s Board of Directors as “executive officers” of NTIC.
Their ages and the offices held, as of November 9, 2020, are as follows:

Name
G. Patrick Lynch

Age
53

President and Chief Executive Officer

Position with NTIC

Matthew C. Wolsfeld

Chief Financial Officer and Corporate Secretary

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer
since January 2006 and was appointed a director of NTIC in February 2004. From July 2005 to January 2006,
Mr. Lynch served as Chief Operating Officer of NTIC. Mr. Lynch served as President of North American Operations
of NTIC from May 2004 to July 2005. Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice
President of Strategic Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of
Inter Alia Holding Company, a holding company that is a significant stockholder of NTIC. Prior to joining NTIC,
Mr. Lynch held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan and programming project
management for BMW AG in Munich, Germany. Mr. Lynch received an M.B.A. degree from the University of
Michigan Ross School of Business in Ann Arbor, Michigan.

Matthew C. Wolsfeld, an employee of NTIC since February 2001, has been NTIC’s Chief Financial Officer since
November 2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was Controller of NTIC from May 2001
through November 2001. Prior to joining NTIC, Mr. Wolsfeld held an auditing position with PricewaterhouseCoopers
LLP in Minneapolis, Minnesota from 1997 to 2001. Mr. Wolsfeld received a B.A. degree in Accounting from the
University of Notre Dame and received his M.B.A. degree at the University of Minnesota, Carlson School of Business.
Mr. Wolsfeld is a Certified Public Accountant.

Other corporate officers of NTIC, their ages, and offices held, as of November 9, 2020, are as follows:

Name

Vineet R. Dalal

Age
51

Position with NTIC
Vice President and Director – Global Market Development – Natur-Tec®

Gautam Ramdas

Vice President and Director – Global Market Development – Oil & Gas

Vineet R. Dalal, an employee of NTIC since 2004, has served as Vice President and Director – Global Market
Development – Natur-Tec® since November 2005. Prior to joining NTIC, Mr. Dalal was a Principal in the Worldwide
Product Development Practice of PRTM, a management consultancy to technology-based companies (now part of
PricewaterhouseCoopers Management Consulting). In this position, Mr. Dalal consulted to several Fortune 500
companies, in the areas of product strategy, Product Lifecycle Management (PLM) and technology management. Prior
to that, Mr. Dalal held positions in program management and design engineering at National Semiconductor
Corporation in Santa Clara, California. Mr. Dalal received an M.B.A. degree from the University of Michigan Ross
School of Business in Ann Arbor, Michigan. He also holds an M.S. degree in Electrical and Computer Engineering
from Oregon State University, and a B.Eng. degree in Electronics Engineering from Karnatak University, India.

Gautam Ramdas, an employee of NTIC since 2005, has served as Vice President and Director – Global Market
Development – Oil & Gas since 2005. Prior to joining NTIC, Mr. Ramdas was a Manager in the Strategic Change
group of IBM Business Consulting Services. In this position, Mr. Ramdas led consulting engagements at several
Fortune 500 companies, in the areas of service strategy, global supplier relationship management and supply chain
streamlining. Mr. Ramdas held positions in the E-Commerce and Supply Chain strategy groups at
PricewaterhouseCoopers Management Consulting, again providing consulting services for Fortune 500 clients. Prior to
management consulting, Mr. Ramdas worked as a program manager and design engineer with Kinhill Engineers in
Australia. He has also been involved in the start-up stage of successful small businesses in the United States and in
India. Mr. Ramdas received an M.B.A. from the University of Michigan Ross School of Business in Ann Arbor,
Michigan. He also holds a bachelor’s degree in Mechanical Engineering from the College of Engineering, Guindy
(Chennai), India.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

NTIC’s common stock is listed for trading on the Nasdaq Global Market under the symbol “NTIC.”

Dividends

During fiscal 2020, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts
to holders of record of NTIC’s common stock as of the following record dates:

Declaration Date
October 22, 2019
January 22, 2020

Amount
$0.065
$0.065

Record Date
November 6, 2019
February 5, 2020

Payable Date
November 20, 2019
February 19, 2020

On April 23, 2020, NTIC announced the temporary suspension of its quarterly cash dividend pending clarity on the
COVID-19 pandemic. Therefore, NTIC’s Board of Directors did not declare a cash dividend during the quarters ended
May 31, 2020 or August 31, 2020.

The declaration of future dividends is not guaranteed and will be determined by NTIC’s Board of Directors in light of
conditions then existing, including NTIC’s earnings, financial condition, cash requirements, restrictions in financing
agreements, business conditions, and other factors, including without limitation the effect of COVID-19 on its business,
operating results, and financial condition.

Number of Record Holders

As of August 31, 2020, there were 164 record holders of NTIC’s common stock. This does not include shares held in
“street name” or beneficially owned.

Recent Sales of Unregistered Equity Securities

NTIC did not sell any shares of its common stock or any other equity securities of NTIC that were not registered under
the Securities Act of 1933, as amended, during the fourth quarter of fiscal 2020.

Issuer Purchases of Equity Securities

NTIC did not purchase any shares of its common stock or other equity securities of NTIC during the fourth quarter of
fiscal 2020. As of August 31, 2020, up to $2,640,548 in shares of NTIC common stock remained available for
repurchase under NTIC’s stock repurchase program.

Item 6.

SELECTED FINANCIAL DATA

The following tables set forth certain of NTIC’s selected consolidated financial data as of the dates and for the fiscal
years indicated. The selected consolidated financial data was derived from NTIC’s consolidated financial statements.
The audited consolidated financial statements as of August 31, 2020 and 2019 and for the fiscal years ended August 31,
2020 and 2019 are included elsewhere in this report. The audited consolidated financial statements as of August 31,
2018, 2017, and 2016 and for the fiscal years ended August 31, 2018, 2017, and 2016 are not included in this report.
Information regarding accounting changes and material uncertainties are included in “Part II. Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” Historical results are not necessarily
indicative of the results to be expected for any future period. All share and per share data have been adjusted for all
periods presented to reflect the two-for-one stock split effective June 28, 2019.

2020

Fiscal Year Ended August 31,
2018

2017

2019

Statements of Operations Data:
Net sales, excluding joint ventures ........................ $ 45,666,045 $ 53,142,583
Net sales, to joint ventures ....................................
2,607,554
55,750,137
Total net sales ......................................................
37,970,244
Cost of goods sold .................................................
17,779,893
Gross profit .........................................................
7,225,518
Equity in income from joint ventures ....................
Fees for services provided to joint ventures ..........
5,727,579
12,953,097
Total joint venture operations ...........................
10,968,592
Selling expenses ....................................................
9,349,559
General and administrative expenses ....................
Research and development expenses .....................
3,822,070
24,140,221
Total operating expenses ...................................
6,592,769
Operating income ..................................................
78,257
Interest income ......................................................
(13,567)
Interest expense .....................................................
—
Impairment on investment at carrying value.........
—
Other income .........................................................
Income (loss) before income taxes ........................
Less: Income tax expense ................................
Net (loss) income .................................................
Less: Net income (loss) attributable to non-

1,972,646
47,638,691
31,609,274
16,029,417
4,270,327
4,612,885
8,883,212
10,656,689
8,688,309
3,979,455
23,324,453
1,588,176
167,733
(16,034)
—
—

1,739,875
2,674,635
(934,760)

6,657,459
841,837
5,815,622

controlling interests ...........................................

606,000
Net (loss) income attributable to NTIC ................. $ (1,337,709) $ 5,209,622
Net (loss) income attributable to NTIC per

402,949

$ 48,516,749 $ 36,346,645
3,222,478
39,569,123
26,316,511
13,252,612
5,898,908
5,452,687
11,351,595
9,283,310
7,807,563
2,912,393
20,003,266
4,600,941
43,539
(20,382)

2,908,072
51,424,821
34,165,440
17,259,381
7,527,383
6,142,139
13,669,522
10,886,011
8,500,490
3,524,953
22,911,454
8,017,449
99,463
(17,962)
—
—
8,098,950
876,103
7,222,847

—
—

4,624,098
699,519
3,924,579

521,481

502,453
$ 6,701,366 $ 3,422,126

common share:

Basic ................................................................. $
Diluted .............................................................. $
Weighted-average common shares assumed

outstanding:

(0.15) $
(0.15) $

0.57
0.55

$
$

0.74 $
0.72 $

0.38
0.38

2016

$ 30,211,660
2,721,905
32,933,565
22,320,156
10,613,409
4,743,831
5,137,710
9,881,541
6,255,353
8,232,369
4,724,596
19,212,318
1,282,632
42,115
(13,261)
(1,883,668)
—
(572,182)
626,120
(1,198,302)

(330,788)
(867,514)

(0.10)
(0.10)

$
$

Basic .................................................................
Diluted ..............................................................

9,096,981
9,096,981

9,085,584
9,415,974

9,077,676
9,370,404

9,057,222
9,154,718

9,075,008
9,075,008

Balance Sheet Data:
Cash and cash equivalents ..................................... $ 6,403,032 $ 5,856,758 $ 4,163,023 $ 6,360,201
3,766,984
Available for sale securities ..................................
26,067,618
Total current assets ................................................
56,612,693
Total assets ............................................................
Total current liabilities ..........................................
4,894,617
Total long-term liabilities ......................................
Non-controlling interests .......................................
Total stockholders’ equity .....................................
Total equity ...........................................................

5,544,722
33,202,350
66,074,488
6,097,604
272,443
3,045,026
56,659,415
59,704,441

3,565,258
33,302,362
67,511,087
7,841,532

3,300,110
30,567,773
63,549,236
7,730,182

2,857,448
48,860,628
51,718,076

3,074,679
56,594,615
59,669,294

2,742,309
53,076,745
55,819,054

—

3,395,274
2,243,864
20,942,171
51,070,050
3,994,102

—

2,540,973
44,543,975
47,075,948

2020

2019

2018

2017

2016

Fiscal Year Ended August 31,

Other Financial Data:
Net cash provided by (used in) operating activities $ 4,912,070 $ 5,477,022 $
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash

(2,784,682)
(1,518,005)

(1,339,921)
(2,393,664)

608,687 $ 5,735,691 $

(300,109)
(2,372,124)

(2,607,915)
(226,690)

2,055,607
(955,240)
(270,247)

equivalents .........................................................

(63,109)

(49,702)

(133,632)

63,839

(18,826)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable
investors and other users to assess NTIC’s financial condition and results of operations. Statements that are not
historical are forward-looking and involve risks and uncertainties discussed under the heading “Part I. Item 1.
Business—Forward-Looking Statements” and under the heading “Part I. Item 1A. Risk Factors.” The following
discussion of the results of the operations and financial condition of NTIC should be read in conjunction with NTIC’s
consolidated financial statements and the related notes thereto included under “Part II. Item 8. Financial Statements and
Supplementary Data.”

This Management’s Discussion and Analysis is organized in the following major sections:

(cid:120) Business Overview. This section provides a brief overview description of NTIC’s business, focusing in

particular on developments during the most recent fiscal year.

(cid:120)

Impact of the COVID-19 Pandemic. This section provides a brief summary of the impacts to date and
potential future impacts of the COVID-19 pandemic.

(cid:120) NTIC’s Subsidiaries and Joint Venture Network. This section provides a brief overview of NTIC’s

subsidiaries and its joint venture network, the joint ventures which are considered individually significant to
NTIC’s consolidated assets and income, and how NTIC’s joint ventures are accounted for by NTIC.

(cid:120) Financial Overview. This section provides a brief summary of NTIC’s financial results and financial

condition for fiscal 2020 compared to 2019.

(cid:120)

Sales and Expense Components. This section provides a brief description of the significant line items in
NTIC’s consolidated statements of operations.

(cid:120) Results of Operations. This section provides an analysis of the significant line items in NTIC’s consolidated

statements of operations.

(cid:120) Liquidity and Capital Resources. This section provides an analysis of NTIC’s liquidity and cash flows and a

discussion of NTIC’s financial condition and financial commitments.

(cid:120)

Inflation and Seasonality. This section describes the effects of inflation and seasonality, if any, on NTIC’s
business and operating results.

(cid:120) Market Risk. This section describes material market risks to which NTIC is subject.

(cid:120) Related Party Transactions. This section describes any material related party transactions to which NTIC is

a party.

(cid:120) Off-Balance Sheet Arrangements. This section describes NTIC’s material off-balance sheet arrangements.

(cid:120) Critical Accounting Policies and Estimates. This section discusses NTIC’s critical accounting policies and
estimates, which require NTIC to exercise subjective or complex judgments in their application. NTIC’s

significant accounting policies, including its critical accounting estimates, are summarized in Note 1 to NTIC’s
consolidated financial statements.

(cid:120) Recent Accounting Pronouncements. This section references Note 2 to NTIC’s consolidated financial

statements, which summarizes the effect of recently issued accounting pronouncements on NTIC’s results of
operations and financial condition.

Business Overview

NTIC develops and markets proprietary, environmentally beneficial products and services in over 60 countries either
directly or via a network of subsidiaries, joint ventures, independent distributors, and agents. NTIC’s primary business
is corrosion prevention, marketed mainly under the ZERUST® brand. NTIC has been selling its proprietary ZERUST®
products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets for
over 40 years and, in recent years, has targeted and expanded into the oil and gas industry. NTIC also markets and sells
a portfolio of bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products
under the Natur-Tec® brand. These products are intended to reduce NTIC’s customers’ carbon footprint and provide
environmentally sound waste disposal options.

NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids, coatings, rust
removers, cleaners, and diffusers as well as engineered solutions designed specifically for the oil and gas industry.
NTIC also offers worldwide, on-site, technical consulting for rust and corrosion prevention issues. NTIC’s technical
service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to
analyze their specific needs to meet their performance requirements. In North America, NTIC sells its ZERUST®
corrosion prevention solutions through a network of independent distributors and agents supported by a direct sales
force.

NTIC’s Subsidiaries and Joint Venture Network

Subsidiary Name

____________________

Country
China
United States
Brazil
Mexico
India
Sri Lanka(1)
Germany
Singapore(2)
Vietnam(2)

NTIC
Percent (%)
Ownership
100%
60%
85%
100%
75%
75%
100%
60%
60%

(1) Natur Tec Lanka (Pvt) Ltd is 100% owned by Natur-Tec India Private Limited and, therefore, indirectly

owned by NTIC.

(2) Zerust Singapore Pte Ltd and Zerust Vietnam Co. Ltd are 100% owned by NTI Asean LLC and, therefore,

indirectly owned by NTIC.

The results of these subsidiaries are fully consolidated in NTIC’s consolidated financial statements.

NTIC’s receives funds from its joint ventures as fees for services that NTIC provides to its joint ventures and as
dividend distributions. The fees for services provided to joint ventures are determined based on either a flat fee or a
percentage of sales depending on local laws and tax regulations. With respect to NTIC’s joint venture in Germany
(EXCOR), NTIC recognizes an agreed upon quarterly fee for services. NTIC recognizes equity income from each joint
venture based on the overall profitability of the joint venture. Such profitability is subject to variability from quarter to
quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to quarter. The profits of each joint venture
are shared by the respective joint venture owners in accordance with their respective ownership percentages. NTIC
typically directly or indirectly owns 50% or less of each of its joint venture entities and, thus, does not control the
decisions of these entities regarding whether to pay dividends and, if paid, what amount is paid in a given year. The
payment of a dividend by an entity is determined by a joint vote of the owners and is not at the sole discretion of NTIC.

NTIC accounts for the investments and financial results of its joint ventures in its financial statements utilizing the
equity method of accounting.

NTIC considers EXCOR, ZERUST OY, ACOBAL SAS, HARITA-NTI LTD and ZERUST SPECIALTY TECH CO.
LTD. to be individually significant to NTIC’s consolidated assets and income. Therefore, NTIC provides certain
additional information regarding these entities in the notes to NTIC’s consolidated financial statements and in this
section of this report.

Impact of the COVID-19 Pandemic

As part of efforts to contain the spread of COVID-19, federal, state, local and foreign governments imposed various
restrictions on the conduct of business and travel, some of which remain in place in whole or in part. Government
restrictions, such as stay-at-home orders, quarantines and worker absenteeism as a result of COVID-19, have led to a
significant number of business closures and slowdowns. These business closures and slowdowns have adversely
impacted and will likely continue to adversely impact NTIC directly and have caused some of NTIC’s customers and
suppliers to operate at a fraction of their capacities or wholly lock down, which has disrupted and may continue to
disrupt NTIC’s sales and production.

As the events surrounding the COVID-19 pandemic unfolded, NTIC’s primary focus was, and continues to be, the
health, safety and wellbeing of its employees, customers and suppliers. In order to continue its operations, as permitted
by respective state, local and foreign governments, NTIC has adopted numerous safety measures in accordance with
U.S. Centers for Disease Control and Prevention, World Health Organization, and federal, state, local and foreign
guidance in order to protect its employees, customers and suppliers. These safety measures include, but are not limited
to, adhering to social distancing protocols, enabling the majority of its employees to work from home, suspending non-
essential travel, disinfecting facilities and workspaces extensively and frequently, suspending all non-essential visitors
and requiring employees who must be present at NTIC’s facilities to wear face coverings. NTIC expects to continue
such safety measures for the foreseeable future and may take further actions, or adapt these existing policies, as
government authorities may require or recommend or as it may determine to be in the best interests of its employees,
customers and suppliers.

NTIC has been balancing its safety-focused approach with the needs of its customers. Government mandated measures
resulting in the substantial curtailment of business activities generally have excluded certain essential businesses and
services, including certain manufacturing. With the exception of the temporary closures of NTIC’s facilities in China
and India during the second and third fiscal quarters of 2020, NTIC’s manufacturing activities are generally considered
part of the “critical sector” with respect to state and local government orders. This has allowed NTIC to continue to
receive orders and provide uninterrupted order fulfillment to its customers. However, its facilities have been operating
at a reduced capacity in order to abide by local government requirements and recommendations, such as social
distancing practices, and in response to reduced demand. At various times during the second, third, and fourth quarters
of fiscal 2020, certain of NTIC’s facilities were impacted by reduced levels of production, manufacturing inefficiencies
due to the reconfiguration of certain of its manufacturing processes in order to implement social distancing protocols
and reduced demand. NTIC has engaged and continues to engage in communications with its suppliers in an attempt to
identify and mitigate supply chain risks and proactively manage inventory levels in order to align production with
demand. While domestic and international governmental measures may be modified or extended, NTIC currently
expects that its global facilities will remain operational, although operating at reduced production capacity at certain of
its facilities. However, such expectation is dependent upon future governmental actions and demand for NTIC’s
products, the stability of its global supply chain and the ability of carriers to transport supplies to its facilities and
products to its customers.

As a result of the global economic slowdown caused by the COVID-19 pandemic, NTIC experienced significantly
decreased demand for its products, beginning with its second quarter of fiscal 2020, compared to the prior fiscal year
periods, which had a material adverse effect on NTIC’s operating results. NTIC anticipates continued softened global
demand for its products and services during fiscal 2021. Due to the international reach of COVID-19, NTIC’s
international joint ventures have also been adversely impacted, which has had and may continue to have a material
adverse effect on NTIC’s joint venture operations and equity in income from joint ventures. It is currently not possible
to predict the precise potential impact, as well as the extent of any future impact, of the COVID-19 pandemic on
NTIC’s business and on the global economy as a whole. It is also currently not possible to predict how long the
pandemic will last or the time that it will take for economic activity to return to prior levels. A prolonged situation
could have a significant adverse effect on economies and financial markets globally, potentially leading to a significant

worldwide economic downturn, which could have a significant adverse effect on NTIC’s business, operating results and
financial condition.

The extent to which the COVID-19 pandemic will continue to impact NTIC’s business will likely depend on numerous
evolving factors that NTIC may not be able to accurately predict, including:

(cid:120)
(cid:120)

(cid:120)
(cid:120)
(cid:120) NTIC’s ability to continue to manufacture and sell its products and services, including as a result of travel

(cid:120)
(cid:120)

Any of these events could materially adversely affect NTIC’s business, operating results and financial condition.

Financial Overview

NTIC’s management, including its chief executive officer, who is NTIC’s chief operating decision maker, reports and
manages NTIC’s operations in two reportable business segments based on products sold, customer base, and
distribution center: ZERUST® products and services and Natur-Tec® products.

NTIC’s consolidated net sales decreased 14.5% during fiscal 2020 compared to fiscal 2019. NTIC’s consolidated net
sales for fiscal 2020 were adversely affected by reduced demand globally as a result of the COVID-19 pandemic. NTIC
anticipates that the COVID-19 pandemic will continue to significantly adversely affect NTIC’s consolidated net sales
and earnings during fiscal 2021.

During fiscal 2020, 72.4% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and
services, which decreased 9.7% to $34,474,535 during fiscal 2020 compared to $38,174,712 during fiscal 2019. This
decrease was due to lower sales to existing customers for products as a result of decreased demand, primarily as a result
of the COVID-19 pandemic. NTIC has focused its sales efforts of ZERUST® products and services by strategically
targeting customers with specific corrosion issues in new market areas, including the oil and gas industry and other
industrial sectors that offer sizable growth opportunities. NTIC’s consolidated net sales for fiscal 2020 included
$2,782,874 of sales made to customers in the oil and gas industry compared to $2,727,283 for fiscal 2019. Overall
demand for ZERUST® products and services depends heavily on the overall health of the markets in which NTIC sells
its products, including the automotive, oil and gas, agriculture, and mining markets in particular. NTIC’s sales of
ZERUST® products and services for fiscal 2020 were adversely affected by reduced demand globally as a result of the
COVID-19 pandemic. NTIC anticipates that the COVID-19 pandemic will continue to significantly adversely affect
sales of ZERUST® products and services during fiscal 2021.

During fiscal 2020, 27.6% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products compared
to 31.5% during fiscal 2019. Net sales of Natur-Tec® products decreased 25.1% to $13,164,156 during fiscal 2020
compared to fiscal 2019 primarily due to a decrease in finished product sales in North America and finished product
sales at NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec India) and reduced
demand globally as a result of the COVID-19 pandemic. NTIC anticipates that the COVID-19 pandemic will continue
to significantly adversely affect sales of Natur-Tec® products during fiscal 2021.

Cost of goods sold as a percentage of net sales decreased to 66.4% during fiscal 2020 compared to 68.1% during fiscal
2019 primarily as a result of an increased percentage of product sales from ZERUST® oil and gas products, which have
higher gross margins than NTIC’s traditional ZERUST® industrial products and services or its Natur-Tec® products.

NTIC’s equity in income from joint ventures decreased 40.9% to $4,270,327 during fiscal 2020 compared to $7,225,518
during fiscal 2019. This decrease was primarily due to a corresponding decrease in net sales at the joint ventures, which
were $87,030,062 during fiscal 2020, compared to $114,635,435 during fiscal 2019. The majority of the decrease in

sales at the joint ventures is attributable to the decrease in net sales at EXCOR, which were $32,546,402 during fiscal
2020, compared to $47,015,841 during fiscal 2019. The decrease in the net sales of NTIC’s joint ventures was due
primarily to decreased sales to existing customers for existing products as a result of decreased demand as a result of the
COVID-19 pandemic. The decrease in net sales of NTIC’s joint ventures resulted in a corresponding decrease in fees
for services provided to joint ventures, as such fees are a function of net sales of NTIC’s joint ventures. NTIC
anticipates that net sales of its joint ventures will continue to decrease significantly as a result of decreased demand as a
result of the COVID-19 pandemic and may continue to have a significant adverse effect on NTIC’s equity in income
from its joint ventures.

NTIC’s total operating expenses decreased $815,768, or 3.4%, to $23,324,453 during fiscal 2020 compared to
$24,140,221 during fiscal 2019. This decrease was primarily due to the suspension of travel and work from home
initiatives as a result of the COVID-19 pandemic during fiscal 2020.

NTIC spent $3,979,455 in fiscal 2020 in connection with its research and development activities, compared to
$3,822,070 in fiscal 2019. NTIC anticipates that it will spend a total of between $3,900,000 and $4,100,000 in fiscal
2021 on research and development activities.

NTIC incurred a net loss attributable to NTIC of $(1,337,709), or $(0.15) per diluted common share, for fiscal 2020,
compared to net income attributable to NTIC of $5,209,622, or $0.55 per diluted common share, for fiscal 2019.
NTIC’s earnings were significantly affected by the COVID-19 pandemic during fiscal 2020 and NTIC anticipates that
its earnings will continue to be significantly adversely affected by the COVID-19 pandemic during fiscal 2021.
Additionally, NTIC recorded a tax valuation allowance of approximately $1,600,000 against its U.S. net deferred tax
asset, which had an adverse impact on its earnings for fiscal 2020. For more information regarding this tax valuation
allowance, see “Part II. Item 8. Financial Statements and Supplementary Data – 14. Income Taxes” of this report.
NTIC anticipates that its quarterly net income or loss will continue to remain subject to significant volatility primarily
due to the financial performance of its subsidiaries and joint ventures, sales of its ZERUST® products and services into
the oil and gas industry, and sales of its Natur-Tec® bioplastics products, which fluctuate more on a quarterly basis than
the traditional ZERUST® business.

NTIC’s working capital, defined as current assets less current liabilities, was $27,104,746 at August 31, 2020, including
$6,403,032 in cash and cash equivalents and $5,544,722 in available for sale securities, compared to $25,460,569 at
August 31, 2019, including $5,856,758 in cash and cash equivalents and $3,565,258 in available for sale securities.

On April 23, 2020, NTIC announced the temporary suspension of its quarterly cash dividend pending the impact of the
COVID-19 pandemic on NTIC. Accordingly, NTIC did not declare a cash dividend during the quarters ended May 31,
2020 and August 31, 2020. Prior to this suspension, NTIC’s Board of Directors declared a cash dividend of $0.065 per
share during its first and second quarters of fiscal 2020. During fiscal 2019, NTIC’s Board of Directors declared four
quarterly cash dividends of $0.06 per share each. The length of the Company’s suspension of its quarterly cash
dividend is currently unknown, and the declaration of future dividends is not guaranteed and will be determined by
NTIC’s Board of Directors in light of conditions then existing, including NTIC’s earnings, financial condition, cash
requirements, restrictions in financing agreements, business conditions, and other factors, including without limitation
the effect of COVID-19 on NTIC’s business, operating results and financial condition.

Sales and Expense Components

The following is a description of the primary components of net sales and expenses:

Net Sales, Excluding Joint Ventures. NTIC derives net sales from the sale of its ZERUST® products and services and
its Natur-Tec® products. NTIC sells its ZERUST® products and services and its Natur-Tec® products either directly,
through its subsidiaries, or via a network of joint ventures, independent distributors, and agents. Net sales, excluding
joint ventures represents net sales by NTIC either directly to end users or to distributors worldwide, but not sales to
NTIC’s joint ventures and not sales by NTIC’s joint ventures. NTIC recognizes revenue from the sale of its products
primarily upon shipment of the products.

Net Sales, To Joint Ventures. Net sales, to joint ventures represents net sales by NTIC to NTIC’s joint ventures, but
not sales by NTIC either directly to end users or to distributors or sales by NTIC’s joint ventures. NTIC’s revenue

recognition policy for sales to its joint ventures is the same as NTIC’s policy for sales to unaffiliated customers. NTIC
recognizes revenue from the sale of its products to joint ventures primarily upon shipment of the products.

Cost of Goods Sold. Most of NTIC’s products are manufactured by third parties, and its cost of goods sold for those
products consists primarily of the price invoiced by its third-party vendors. For the portion of products that NTIC
manufactures, NTIC’s cost of goods sold for those products consists primarily of direct labor, allocated manufacturing
overhead, raw materials, and components. NTIC’s margins on its Natur-Tec® resin compounds and finished products
are generally smaller than its margins on its ZERUST® products and services, and NTIC’s margins on its ZERUST®
products and services sold into the oil and gas industry are generally greater than its margins on its traditional
ZERUST® products and services.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures consists of NTIC’s share of
equity in income from each joint venture based on the overall profitability of the joint ventures. Such profitability is
subject to variability from quarter to quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to
quarter. Traditionally, a portion of the equity income recorded in a given fiscal year is paid to the owners of the joint
venture entity during the following fiscal year through a dividend. The payment of a dividend by a joint venture entity
is determined by a vote of the joint venture owners and is not at the sole discretion of NTIC. NTIC typically owns only
50% or less of its joint venture entities and, thus, does not control the decisions of these entities regarding whether to
pay dividends and, if paid, how much they should be in a given year.

Fees for Services Provided to Joint Ventures. NTIC provides certain services to its joint ventures, including
consulting, legal, travel, insurance, technical, and marketing services based on licensing or other agreements with its
joint ventures. NTIC receives fees for these services it provides to its joint ventures based primarily on the net sales by
NTIC’s joint ventures, the latter of which are not included in NTIC’s net sales reflected on NTIC’s consolidated
statements of operations. The fees for services received by NTIC from its joint ventures are generally determined based
on either a flat fee or a percentage of net sales by NTIC’s joint ventures depending on local laws and tax regulations.
With respect to EXCOR, NTIC receives an agreed upon fixed quarterly fee for such services. Under NTIC’s
agreements with its joint ventures in which the fees for services is described, amounts are earned when product is
shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation of the
joint venture to pay the royalty and recognition of the fee by the Company.

Selling Expenses. Selling expenses consist primarily of sales commissions and support costs for NTIC’s direct sale and
distribution system and marketing costs.

General and Administrative Expenses. General and administrative expenses consist primarily of salaries and benefits
and other costs for NTIC’s executives, accounting, stock-based compensation, finance, legal, information technology,
and human resources functions.

Research and Development Expenses. Research and development expenses include costs associated with the design,
development, market analysis, lab testing, and field trials and enhancements of NTIC’s products and services. NTIC
expenses all costs related to product research and development as incurred. Research and development expenses reflect
the net amount after being reduced by reimbursements related to certain research and development contracts. With
respect to such research and development contracts, NTIC accrues proceeds received under the contracts and offsets
research and development expenses incurred in equal installments over the timelines associated with completion of the
contracts’ specific objectives and milestones.

Interest Income. Interest income consists of interest earned on investments, which typically consist of investment-
grade, interest-bearing securities and money market accounts.

Interest Expense. Interest expense results primarily from interest associated with any borrowings under NTIC’s line of
credit with PNC Bank.

Income Tax Expense. Income tax expense includes federal income taxes, foreign withholding taxes, income tax of
consolidated entities in foreign jurisdictions, state income tax, and changes to NTIC’s deferred tax valuation allowance.
NTIC utilizes the asset and liability method of accounting for income taxes, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax basis of assets and liabilities that will result

in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. NTIC records a tax valuation allowance when it is more
likely than not that some portion or all of its deferred tax assets will not be realized. NTIC makes this determination
based on all available evidence, including historical data and projections of future results. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Results of Operations

Fiscal Year 2020 Compared to Fiscal Year 2019

The following table sets forth NTIC’s results of operations for fiscal 2020 and fiscal 2019.

Net sales, excluding joint ventures ..................
Net sales, to joint ventures ..............................
Cost of goods sold ..............................................
Equity in income from joint ventures .................
Fees for services provided to joint ventures........
Selling expenses ............................................
General and administrative expenses ...............
Research and development expenses ...............

Fiscal 2020
$ 45,666,045
1,972,646
31,609,274
4,270,327
4,612,885
10,656,689
8,688,309
3,979,455

Fiscal 2019

% of
Net
Sales
95.9% $ 53,142,583
2,607,554
37,970,244
7,225,518
5,727,579
10,968,592
9,349,559
3,822,070

4.1%
66.4%
9.0%
9.7%
22.4%
18.2%
8.4%

% of
Net
Sales
95.3%
4.7%
68.1%
13.0%
10.3%
19.7%
16.8%
6.9%

$
Change
$ (7,476,538)
(634,908)
(6,360,970)
(2,955,191)
(1,114,694)
(311,903)
(661,250)
157,385

%
Change
(14.1)%
(24.3)%
(16.8)%
(40.9)%
(19.5)%
(2.8)%
(7.1)%
4.1%

Net Sales. NTIC’s consolidated net sales decreased 14.5% to $47,638,691 during fiscal 2020 compared to $55,750,137
during fiscal 2019. NTIC’s consolidated net sales to unaffiliated customers excluding NTIC’s joint ventures decreased
14.1% to $45,666,045 during fiscal 2020 compared to $53,142,583 during fiscal 2019. Net sales to joint ventures
decreased 24.3% to $1,972,646 in fiscal 2020 compared to fiscal 2019. These decreases were primarily a result of
reduced demand globally as a result of the COVID-19 pandemic. NTIC anticipates that the COVID-19 pandemic will
continue to significantly adversely affect sales of ZERUST® products and services during fiscal 2021.

The following table sets forth NTIC’s net sales by product segment for fiscal 2020 and fiscal 2019:

Fiscal 2020
Total ZERUST® sales ....................... $ 34,474,535
Total Natur-Tec® sales .....................
13,164,156
Total net sales ................................... $ 47,638,691

Fiscal 2019
$ 38,174,712
17,575,425
$ 55,750,137

$
Change
$ (3,700,177)
(4,411,269)
$ (8,111,446)

%
Change

(9.7)%
(25.1)%
(14.5)%

During fiscal 2020, 72.4% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and
services, which decreased 9.7% to $34,474,535 compared to $38,174,712 during fiscal 2019. NTIC has strategically
focused its sales efforts for ZERUST® products and services on customers with sizeable corrosion problems in industry
sectors that offer sizable growth opportunities, including the oil and gas sector. Overall, demand for ZERUST®
products and services depends heavily on the overall health of the market segments to which NTIC sells its products,
including the automotive, oil and gas, agriculture, and mining markets in particular. This decrease was primarily a
result of reduced demand globally as a result of the COVID-19 pandemic. NTIC anticipates that the COVID-19
pandemic will continue to significantly adversely affect sales of ZERUST® products and services during fiscal 2021.

The following table sets forth NTIC’s net sales of ZERUST® products for fiscal 2020 and fiscal 2019:

ZERUST® industrial net sales ................... $
ZERUST® joint venture net sales ..............
ZERUST® oil & gas net sales ....................

Total ZERUST® net sales ................... $

29,719,015
1,972,646
2,782,874
34,474,535

32,839,875
2,607,554
2,727,283
38,174,712

Fiscal 2020

Fiscal 2019

$
Change
$ (3,120,860)
(634,908)
55,591
$ (3,700,177)

%
Change
(9.5)%
(24.3)%
2.0%
(9.7)%

NTIC’s total ZERUST® net sales decreased during fiscal 2020 compared to fiscal 2019 primarily due to overall
decreased demand for ZERUST® industrial products and services in North America, partially offset by increased
demand for ZERUST® oil and gas products and services. NTIC’s sales of ZERUST® industrial products and services
for fiscal 2020 were adversely affected by reduced demand globally as a result of the COVID-19 pandemic.

Demand for ZERUST® products and services decreased significantly beginning in February 2020 largely as a result of
the COVID-19 pandemic and will likely have a significant adverse effect on sales of ZERUST® products and services
during fiscal 2021.

ZERUST® oil and gas net sales increased 2.0% during fiscal 2020 compared to fiscal 2019 primarily as a result of new
opportunities with new customers, partially offset by reduced demand as a result of the COVID-19 pandemic. The
pandemic’s impact on NTIC’s ZERUST® oil and gas business was primarily due to significantly lower oil prices and
travel restrictions, which inhibited NTIC’s ability to travel to customer sites in order to install solutions. NTIC expects
its oil and gas sales will continue to be impacted for the duration of the pandemic. NTIC also anticipates that its sales of
ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility
from quarter to quarter as sales are recognized, specifically due to the volatility of oil prices. Demand for oil and gas
products around the world depends primarily on market acceptance and the reach of NTIC’s distribution network.
Because of the typical size of individual orders and overall size of NTIC’s net sales derived from sales of oil and gas
products, the timing of one or more orders can materially affect NTIC’s quarterly sales compared to prior fiscal year
quarters.

During fiscal 2020, 27.6% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared
to 31.5% during fiscal 2019. Sales of Natur-Tec® products decreased 25.1% to $13,164,156 during fiscal 2020
compared to $17,575,425 during fiscal 2019. This decrease was primarily due to a decrease in finished product sales in
North America and finished product sales at NTIC’s majority-owned subsidiary in India, Natur-Tec India Private
Limited (Natur-Tec India), and decreased demand globally as a result of the COVID-19 pandemic. The COVID
pandemic has adversely impacted demand from across the apparel industry, as well as many large users of bioplastics,
including college campuses, stadiums, arenas, restaurants, and corporate office complexes. NTIC currently expects
these customers will be some of the last businesses to re-open, and accordingly, anticipates that the COVID-19
pandemic will continue to significantly adversely affect sales of Natur-Tec® products during fiscal 2021.

Cost of Goods Sold. Cost of goods sold decreased 16.8% in fiscal 2020 compared to fiscal 2019 primarily as a result of
the decrease in net sales, as described above. Cost of goods sold as a percentage of net sales decreased to 66.4% during
fiscal 2020 compared to 68.1% during fiscal 2019 primarily due to an increased percentage of product sales from
ZERUST® oil and gas products, which have higher gross margins than NTIC’s traditional ZERUST® industrial products
and services or its Natur-Tec® products.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures decreased 40.9% to $4,270,327
during fiscal 2020 compared to $7,225,518 during fiscal 2019. This decrease was primarily a result of decreased
profitability of the joint ventures during fiscal 2020 compared to fiscal 2019 and which fluctuates based on net sales. Of
the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $2,622,423 attributable
to EXCOR during fiscal 2020 compared to $5,415,362 attributable to EXCOR during fiscal 2019. NTIC had equity in
income of all other joint ventures of $1,647,904 during fiscal 2020 compared to $1,810,156 during fiscal 2019.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of
$4,612,885 during fiscal 2020 compared to $5,727,579 during fiscal 2019, representing a decrease of 19.5%, or
$1,114,694. Fee income for services provided to joint ventures is traditionally a function of the sales made by NTIC’s
joint ventures. Total net sales of NTIC’s joint ventures decreased $27,605,373 to $87,030,062 during fiscal 2020
compared to $114,635,435 during fiscal 2019, representing a decrease of 24.1%. Net sales of NTIC’s joint ventures are
not included in NTIC’s product sales and are not included in NTIC’s consolidated financial statements. Of the total fee
income for services provided to joint ventures, fees of $843,752 were attributable to EXCOR during fiscal 2020
compared to $852,526 attributable to EXCOR during fiscal 2019. These decreases are primarily the result of decreased
global demand for NTIC’s products as a result of the COVID-19 pandemic. NTIC anticipates that net sales of its joint
ventures and accordingly its equity in income from its joint ventures will continue to be adversely affected by the
COVID-19 pandemic during fiscal 2021.

Selling Expenses. NTIC’s selling expenses decreased 2.8% in fiscal 2020 compared to fiscal 2019 due primarily to
decreased travel expenses and other expenses due to work from home arrangements necessitated by the COVID-19
pandemic. Selling expenses as a percentage of net sales increased to 22.4% for fiscal 2020 compared to 19.7% in fiscal
2019 primarily due to the decrease in net sales, as previously described.

General and Administrative Expenses. NTIC’s general and administrative expenses decreased 7.1% in fiscal 2020
compared to fiscal 2019 primarily due to decreased travel expenses and other expenses due to work from home
arrangements necessitated by the COVID-19 pandemic, partially offset by approximately $170,000 expense due to a
loss on disposal of certain fixed assets and patents. As a percentage of net sales, general and administrative expenses
increased to 18.2% for fiscal 2020 from 16.8% for fiscal 2019 primarily to the decrease in net sales, as previously
described.

Research and Development Expenses. NTIC’s research and development expenses increased 4.1% in fiscal 2020
compared to fiscal 2019 primarily due to increased personnel and development efforts, partially offset by decreased
travel expenses and other expenses due to work from home arrangements necessitated by the COVID-19 pandemic.

Interest Income. NTIC’s interest income increased to $167,733 in fiscal 2020 compared to $78,257 in fiscal 2019 due
primarily to volatile earnings on available for sale securities.

Interest Expense. NTIC’s interest expense increased to $16,034 in fiscal 2020 compared to $13,567 in fiscal 2019.

Income Before Income Tax Expense. NTIC incurred a profit before income tax expense of $1,739,875 for fiscal 2020
compared to income before income tax expense of $6,657,459 for fiscal 2019.

Income Tax Expense. Income tax expense was $2,674,635 during fiscal 2020 compared to $841,837 during fiscal 2019
for an effective tax rate of 153.7% and 12.7%, respectively. Income tax expense during fiscal 2020 includes $1,626,251
related to the impact of a tax valuation allowance recorded with respect to the Company’s domestic deferred tax assets
during fiscal 2020.

Net (Loss) Income Attributable to NTIC. Net (loss) income attributable to NTIC decreased to a loss of $(1,337,709), or
$(0.15) per diluted common share, for fiscal 2020 compared to income of $5,209,622, or $0.55 per diluted common
share, for fiscal 2019, a decrease of $6,547,334 or $0.70 per diluted share. This decrease was primarily the result of the
increase in the income tax expense noted above and decrease in net sales and resulting gross profit and income from
joint venture operations during fiscal 2020 compared to fiscal 2019 due to the impact of the COVID-19 pandemic.

NTIC anticipates that its earnings will be significantly adversely affected by the COVID-19 pandemic throughout fiscal
2021 and that its quarterly net income or loss will continue to remain subject to significant volatility primarily due to the
financial performance of its subsidiaries and joint ventures, sales of its ZERUST® products and services into the oil and
gas industry, and sales of its Natur-Tec® bioplastics products, which fluctuate more on a quarterly basis than the
traditional ZERUST® business.

Other Comprehensive Income – Foreign Currency Translations Adjustment. The changes in the foreign currency
translations adjustment were due to the fluctuation of the U.S. dollar compared to the Euro and other foreign currencies
during fiscal 2020 compared to fiscal 2019.

Liquidity and Capital Resources

Sources of Cash and Working Capital. As of August 31, 2020, NTIC’s working capital, defined as current assets less
current liabilities, was $27,104,746, including $6,403,032 in cash and cash equivalents and $5,544,722 in available for
sale securities, compared to working capital of $25,460,569, including $5,856,758 in cash and cash equivalents and
$3,565,258 in available for sale securities, as of August 31, 2019. These increases are primarily the result of the
suspension of NTIC’s quarterly cash dividend payments beginning with the third quarter of fiscal 2020, the increase of
dividends received from joint ventures, the collection of outstanding receivables and the decrease in operating expenses
during fiscal 2020 compared to fiscal 2019.

As of August 31, 2020, NTIC had a revolving line of credit with PNC Bank of $3,000,000 with no amounts
outstanding. At the option of the Company, outstanding advances under the line of credit bear interest at either (a) an

annual rate based on LIBOR plus 2.15% for the applicable LIBOR interest period selected by the Company or (b) at the
rate publicly announced by PNC Bank from time to time as its prime rate. On December 16, 2019, the Company and
PNC Bank extended the maturity date of the line of credit from January 7, 2020 to January 7, 2021. All other terms of
the line of credit and the loan agreement and other documents evidencing the line of credit remain the same. It is
anticipated that, as historically has been the practice, the line of credit will be renewed each year for one additional year
for the immediate foreseeable future.

The line of credit is evidenced by an amended and restated committed line of credit note in the principal amount of up
to $3,000,000. The line of credit has a $1,200,000 standby letter of credit sub-facility, with any standby letters of credit
issued thereunder being at the sole discretion of PNC Bank. Any lines of credit issued by PNC Bank would decrease
the availability under the revolving line of credit.

The line of credit is subject to standard covenants, including affirmative financial covenants, such as the maintenance of
a minimum fixed charge coverage ratio, and negative covenants, which, among other things, limit the incurrence of
additional indebtedness, loans and equity investments, disposition of assets, mergers and consolidations, and other
matters customarily restricted in such agreements. Under the loan agreement, NTIC is subject to a minimum fixed
charge coverage ratio of 1.10:1.00. As of August 31, 2020, NTIC was in compliance with all debt covenants.

NTIC believes that a combination of its existing cash and cash equivalents, available for sale securities, forecasted cash
flows from future operations, anticipated distributions of earnings, anticipated fees to NTIC for services provided to its
joint ventures, and funds available through existing or anticipated financing arrangements will be adequate to fund its
existing operations, investments in new or existing joint ventures or subsidiaries, capital expenditures, debt repayments,
cash dividends if NTIC’s Board of Directors decides to reinstate them, and any stock repurchases for at least the next
12 months. During fiscal 2021, NTIC expects to continue to invest directly and through its use of working capital in
NTIC China, Zerust Mexico, NTI Europe, research and development, marketing efforts, resources for the application of
its corrosion prevention technology in the oil and gas industry, and its Natur-Tec® bio-plastics business, although the
amounts of these various investments are not known at this time. In order to take advantage of such new product and
market opportunities to expand its business and increase its revenues, NTIC may decide to finance such opportunities
by borrowing under its revolving line of credit or raising additional financing through the issuance of debt or equity
securities. There is no assurance that any financing transaction will be available on terms acceptable to NTIC or at all
or that any financing transaction will not be dilutive to NTIC’s current stockholders.

NTIC traditionally has used the cash generated from its operations, distributions of earnings from joint ventures, and
fees for services provided to its joint ventures to fund NTIC’s new technology investments and capital contributions to
new and existing subsidiaries and joint ventures. NTIC’s joint ventures traditionally have operated with little or no debt
and have been self-financed with minimal initial capital investment and minimal additional capital investment from
their respective owners.

Uses of Cash and Cash Flow. Net cash provided by operating activities during fiscal 2020 was $4,912,070 which
resulted principally from dividends received from joint ventures, stock-based compensation, depreciation, amortization
and deferred income taxes, partially offset by NTIC’s net loss, equity in income from joint ventures, and an offset by a
decrease in accrued liabilities. Net cash provided by operating activities during fiscal 2019 was $5,477,022, which
resulted principally from NTIC’s net income, dividends received from joint ventures, stock-based compensation,
depreciation, amortization, and an increase in accounts payable, partially offset by NTIC’s equity in income from joint
ventures, an increase in inventory and a decrease in accrued liabilities.

NTIC’s cash flows from operations are impacted by significant changes in certain components of NTIC’s working
capital, including inventory turnover and changes in receivables and payables. NTIC considers internal and external
factors when assessing the use of its available working capital, specifically when determining inventory levels and
credit terms of customers. Key internal factors include existing inventory levels, stock reorder points, customer
forecasts, and customer requested payment terms, and key external factors include the availability of primary raw
materials and sub-contractor production lead times. NTIC’s typical contractual for trade receivables, excluding joint
ventures, are traditionally 30 days and 90 days for trade receivables from its joint ventures. Before extending unsecured
credit to customers, excluding NTIC’s joint ventures, NTIC reviews customers’ credit histories and will establish an
allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers and other
information. Accounts receivable over 30 days are considered past due for most customers. NTIC does not accrue
interest on past due accounts receivable. If accounts receivables in excess of the provided allowance are determined

uncollectible, they are charged to selling expense in the period that the determination is made. Accounts receivable are
deemed uncollectible based on NTIC exhausting reasonable efforts to collect. NTIC’s typical contractual terms for
receivables for services provided to its joint ventures are 90 days. NTIC records receivables for services provided to its
joint ventures on an accrual basis, unless circumstances exist that make the collection of the balance uncertain, in which
case the fee income will be recorded on a cash basis until there is consistency in payments. This determination is
handled on a case by case basis.

NTIC experienced a decrease in trade receivables and an increase in inventory as of August 31, 2020 compared to
August 31, 2019. Trade receivables excluding joint ventures as of August 31, 2020 decreased $1,707,306 compared to
August 31, 2019, primarily related to the timing of collections and the decrease in sales. Outstanding trade receivables
excluding joint ventures balances as of August 31, 2020 decreased by an average of 3 days to an average of 65 days
from balances outstanding from these customers as of August 31, 2019. Outstanding trade receivables from joint
ventures as of August 31, 2020 decreased $348,573 compared to August 31, 2019 primarily due to the timing of
payments. Outstanding balances from trade receivables from joint ventures decreased by an average of 27 days as of
August 31, 2020 to an average of 88 days from an average of 115 days from balances outstanding from these customers
compared to August 31, 2019. The average days outstanding of trade receivables from joint ventures as of August 31,
2020 were primarily due to the receivable balances at NTIC’s joint ventures in United States and India.

Outstanding receivables for services provided to joint ventures as of August 31, 2020 decreased $340,714 compared to
August 31, 2019, and the average days to pay decreased from an average of 81 days to an average of 73 days, compared
to August 31, 2019.

Net cash used in investing activities during fiscal 2020 was $2,784,682, which was primarily the result of the purchase
of available for sale securities, purchases of property and equipment and investments in patents, partially offset by
proceeds from the sale of available for sale securities and the sale of property and equipment. Net cash used in
investing activities during fiscal 2019 was $1,339,921, which was primarily the result of the purchase of available for
sale securities, purchases of property and equipment and investments in patents, partially offset by proceeds from the
sale of available for sale securities.

Net cash used in financing activities for fiscal 2020 was $1,518,005, which resulted from dividends paid on NTIC
common stock and a dividend paid to a non-controlling interest, partially offset by proceeds from NTIC’s employee
stock purchase plan. Net cash used in financing activities for fiscal 2019 was $2,393,664, which resulted from
dividends paid on NTIC common stock and a dividend paid to a non-controlling interest, partially offset by an
investment by a non-controlling interest and proceeds from NTIC’s employee stock purchase plan.

Share Repurchase Plan. On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to
$3,000,000 in shares of NTIC common stock through open market purchases or unsolicited or solicited privately
negotiated transactions. This program has no expiration date but may be terminated by NTIC’s Board of Directors at
any time. As of August 31, 2020, up to $2,640,548 in shares of NTIC common stock remained available for repurchase
under NTIC’s stock repurchase program. No shares of NTIC common stock were repurchased during fiscal 2020 or
fiscal 2019.

Cash Dividends. During fiscal 2020, NTIC’s Board of Directors declared cash dividends on the following dates in the
following amounts to holders of record of the Company’s common stock as of the following record dates:

Declaration Date
October 22, 2019
January 22, 2020

Amount
$0.065
$0.065

Record Date
November 6, 2019
February 5, 2020

Payable Date
November 20, 2019
February 19, 2020

On April 23, 2020, NTIC announced the temporary suspension of its quarterly cash dividend pending clarity on
COVID-19 pandemic. Therefore, NTIC’s Board of Directors did not declare a cash dividend during the quarter ended
May 31, 2020 or the quarter ended August 31, 2020.

Stock Split. On June 3, 2019, NTIC’s Board of Directors declared a two-for-one stock split of NTIC’s common stock
effected in the form of a 100% share dividend distributed on June 28, 2019 to record holders as of June 17, 2019. As a
result of this action, approximately 4.5 million shares were issued to stockholders of record as of June 17, 2019. The
par value of the common stock remains at $0.02 per share, and, accordingly, approximately $90,900 was transferred
from additional paid-in capital to common stock. Net income and dividends declared per share and weighted average
shares outstanding presented in this report reflect the 100 percent stock dividend. The two-for-one stock split is
reflected in the share amounts in all periods presented in this report.

Capital Expenditures and Commitments. NTIC spent $711,412 on capital expenditures during fiscal 2020, which
related primarily to the purchase of new equipment. NTIC expects to spend an aggregate of approximately $600,000 to
$900,000 on capital expenditures during fiscal 2021, which it expects will relate primarily to the purchase of new
equipment.

Contractual Obligations. Set forth below is information concerning NTIC’s known contractual obligations as of
August 31, 2020 that are fixed and determinable by year starting with the twelve months ending August 31, 2021.

Contractual
Obligations
Rent obligations...
Total ..................

Total
674,689
674,689

$
$

Less than
1 Year
$ 386,345
$ 386,345

1-3 Years
$ 288,344
$ 288,344

3-5 Years

$ -0-
$ -0-

More than
5 Years
-0-
-0-

$
$

Payments Due by Period

Inflation and Seasonality

Inflation in the United States and abroad historically has had little effect on NTIC. Although NTIC’s business
historically has not been seasonal, NTIC believes there is now some seasonality in its business. NTIC believes its net
sales in the second fiscal quarter were adversely affected by the long Chinese New Year, which slowdown was extended
in an effort to combat the spread of COVID-19, the North American holiday season, and overall less corrosion taking
place at lower winter temperatures worldwide.

Market Risk

NTIC is exposed to market risk stemming from changes in foreign currency exchange rates, commodity prices, and
interest rates.

Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the
applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the
normal course of business. NTIC’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian
Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for
services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies
and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since
NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency
exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in
income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its
foreign currency exchange rate risk.

Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price
exposures are with a variety of plastic resins.

At the option of NTIC, outstanding advances under NTIC’s $3,000,000 revolving line of credit with PNC Bank bear
interest at either (a) an annual rate based on LIBOR plus 2.15% for the applicable LIBOR interest period selected by
NTIC or (b) at the rate publicly announced by PNC Bank from time to time as its prime rate and, thus, may subject
NTIC to some market risk on interest rates. As of August 31, 2020, NTIC had no borrowings under the line of credit.

Related Party Transactions

Since NTIC’s joint ventures are considered related parties, NTIC recorded sales to its joint ventures as a separate line
item on the face of NTIC’s consolidated statements of operations and recorded fees for services provided to its joint
ventures as separate line items on the face of NTIC’s consolidated statements of operations. NTIC also records trade
receivables from joint ventures, receivables for fees for services provided to joint ventures, and NTIC’s investments in
joint ventures as separate line items on its consolidated balance sheets.

NTIC established its joint venture network approximately 30 years ago as a method to increase its worldwide
distribution network for ZERUST® rust and corrosion inhibiting products and services. NTIC participates, either
directly or indirectly, in 19 active joint venture arrangements in North America, Europe, and Asia. Each of these joint
ventures generally manufactures and markets finished products in the geographic territory to which it is assigned.
NTIC’s joint venture partners are knowledgeable in the applicable environmental, labor, tax, and other requisite
regulations and laws of the respective foreign countries in which they operate, as well as the local customs and business
practices. NTIC’s revenue recognition policy for sales to its joint ventures is the same as its policy for sales to
unaffiliated customers.

The fees for services provided to joint ventures are determined based on either a flat fee or a percentage of sales
depending on local laws and tax regulations. With respect to NTIC’s joint venture in Germany, EXCOR, NTIC
recognizes an agreed upon quarterly fee for such services. NTIC records revenue related to fees for services provided to
joint ventures when earned, amounts are determinable, and collectability is reasonably assured. Under NTIC’s
agreements with its joint ventures, fee amounts are earned when product is shipped from joint venture facilities. NTIC
reviews the financial situation of each joint venture to assist in the likelihood of collections on amounts earned. From
time to time, NTIC elects to account for such fees on a cash basis for certain joint ventures when uncertainty exists
surrounding the collections of such fees. There are no fees being accounted for in this manner at present. The expenses
incurred in support of its joint ventures are direct expenses that NTIC incurs related to its joint ventures and include
such items as employee compensation and benefit expenses, travel expense, insurance, consulting expense, legal
expense, and lab supplies and testing expense.

See Note 13 to NTIC’s consolidated financial statements for other related party transaction disclosures.

Off-Balance Sheet Arrangements

NTIC does not have any relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-
balance sheet financial arrangements. As such, NTIC is not materially exposed to any financing, liquidity, market, or
credit risk that could arise if NTIC had engaged in such arrangements.

Critical Accounting Policies and Estimates

The preparation of NTIC’s consolidated financial statements requires management to make estimates and judgments
that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. The Securities and Exchange Commission has defined a company’s most critical accounting policies as
those that are most important to the portrayal of its financial condition and results of operations and those which require
the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, NTIC has identified the following critical accounting
policies. Although NTIC believes that its estimates and assumptions are reasonable, they are based upon information
available when they are made. Actual results may differ significantly from these estimates under different assumptions
or conditions.

Principles of Consolidation

NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative basis. NTIC consolidates
entities in which it concludes it has the power to direct the activities that most significantly impact an entity’s economic
success and has the obligation to absorb losses or the right to receive benefits that could be significant to the entity. All
such relationships are evaluated on an ongoing basis. The consolidated financial statements include the accounts of
Northern Technologies International Corporation, its wholly-owned subsidiaries, Northern Technologies Holding

Company, LLC, NTIC (Shanghai) Co., Ltd., NTIC Europe GmbH and ZERUST-EXCOR MEXICO, S. de R.L. de
C.V., NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A., NTIC’s majority-owned
holding company, NTI Asean LLC, and NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited,
Natur-Tec Lanka, Zerust Singapore Pte Ltd (Zerust Singapore) and Zerust Vietnam Co. Ltd (Zerust Vietnam). NTIC’s
consolidated financial statements do not include the accounts of any of its joint ventures.

Investments in Joint Ventures and Recoverability of Investments in Joint Ventures

NTIC’s investments in its joint ventures are accounted for using the equity method. NTIC assesses its joint ventures for
impairment on an annual basis as of August 31 of each year as part of its fiscal year end analysis. In addition to the
annual review for impairment, NTIC reviews the operating results of each joint venture on a quarterly basis in
comparison to its historical operating results and its accrual for fees for services provided to joint ventures. If the
operating results of a joint venture do not meet NTIC’s financial performance expectations, an additional evaluation is
performed on the joint venture. In addition to the annual assessments for impairment, non-periodic assessments for
impairment may occur if cash remittances are less than accrued balances, a joint venture’s management requests capital,
or other events occur suggesting anything other than temporary decline in value. If an investment were determined to
be impaired, then a reserve would be created to reflect the impairment on the financial results of NTIC. NTIC’s
evaluation of its investments in joint ventures requires NTIC to make assumptions about future cash flows of its joint
ventures. These assumptions require significant judgment, and actual results may differ from assumed or estimated
amounts.

Investment at Carrying Value

If NTIC is no longer able to exercise significant influence over operating and financial policy of a joint venture
previously accounted for under the equity method, it maintains the investment at the carrying value as of the date that
significant influence no longer exists and discontinues accruing the proportionate earnings or losses of the investment.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value
is calculated based on publicly available market information or other estimates determined by management. NTIC
employs a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in
evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, NTIC evaluates,
among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to
which the fair value is less than cost, and for equity securities, its intent and ability to hold, or plans to sell, the
investment. NTIC also considers specific adverse conditions related to the financial health of and business outlook for
the investee, including industry and sector performance, changes in technology, and operational and financing cash flow
factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to
other income (expense), and a new cost basis in the investment is established.

Revenue Recognition

Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable
estimates of variable consideration and other factors affecting the transaction price, including noncash consideration,
consideration paid or payable to customers, and significant financing components. While most of the Company’s
revenue is contracted with customers through one-time purchase orders and short-term contracts, the Company does
have long-term arrangements with certain customers. Revenue from all customers is recognized when a performance
obligation is satisfied by transferring control of a distinct good or service to a customer. The transaction price for the
Company’s products is the invoiced amount. Revenue is recognized when transfer of control occurs as defined by the
terms in the customer agreement, generally upon shipment of product.

With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures, amounts are
earned when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and
results in obligation for the joint venture to pay the royalty and recognition of the fee by the Company. The support and
services NTIC provides its joint ventures include consulting, travel, insurance, technical and marketing services to
existing joint ventures, legal fees incurred in the establishment of new joint ventures, registration and promotion and
legal defense of worldwide trademarks, and legal fees incurred in connection with the filing of patent applications based
on licensing or other agreements with its joint ventures. NTIC receives fees for the services it provides to its joint
ventures based primarily on the net sales by NTIC’s joint ventures. The fees for support services received by NTIC

from its joint ventures are generally determined based on either a flat fee or a percentage of net sales by NTIC’s joint
ventures depending on local laws and tax regulations. Under NTIC’s agreements with its joint ventures, amounts are
earned when product is shipped from joint venture facilities. NTIC reviews the financial situation of each of its joint
ventures to assist in the likelihood of collections on amounts earned. NTIC elects to account for these fees on a cash
basis for certain joint ventures when uncertainty exists surrounding the collections of such fees.

Accounts Receivable

Trade receivables arise from sales of NTIC’s products and services to NTIC’s joint ventures and to unaffiliated
customers. Trade receivables from joint ventures arise from sales NTIC makes to its joint ventures of products and the
essential additives required to make ZERUST® industrial corrosion inhibiting products functional. Receivables for
services to NTIC’s joint ventures are contractually based primarily on a percentage of the sales of the joint ventures and
are intended to compensate NTIC for services NTIC provides to its joint ventures, including consulting, legal, travel,
insurance, technical, and marketing services.

Payment terms for NTIC’s unaffiliated customers are determined based on credit risk and vary by customer. NTIC
typically offers standard payment terms of net 30 days to unaffiliated customers. Payment terms for NTIC’s joint
ventures also are determined based on credit risk; however, additional consideration is given to the individual joint
venture due to the transportation time associated with ocean delivery of most products and certain other factors. NTIC
typically offers payment terms to joint ventures of net 90 days. NTIC does not accrue interest on past due accounts
receivable. NTIC reviews the credit histories of its customers, including its joint ventures, before extending unsecured
credit. NTIC values accounts and notes receivable net of an allowance for doubtful accounts. Each quarter, NTIC
prepares an analysis of its ability to collect outstanding receivables that provides a basis for an allowance estimate for
doubtful accounts. In doing so, NTIC evaluates the age of its receivables, past collection history, current financial
conditions of key customers and its joint ventures, and economic conditions. Based on this evaluation, NTIC establishes
a reserve for specific accounts and notes receivable that it believes are uncollectible, as well as an estimate of
uncollectible receivables not specifically known. Deterioration in the financial condition of any key customer or joint
venture or a significant slowdown in the economy could have a material negative impact on NTIC’s ability to collect a
portion or all of the accounts and notes receivable. NTIC believes that an analysis of historical trends and its current
knowledge of potential collection problems provide NTIC with sufficient information to establish a reasonable estimate
for an allowance for doubtful accounts. However, since NTIC cannot predict with certainty future changes in the
financial stability of its customers or joint ventures, NTIC’s actual future losses from uncollectible accounts may differ
from its estimates. In the event NTIC determined that a smaller or larger uncollectible accounts reserve is appropriate,
NTIC would record a credit or charge to selling expense in the period that it made such a determination.

Recoverability of Long-Lived Assets

NTIC reviews its long-lived assets whenever events or changes in circumstances indicate the carrying amount of the
assets may not be recoverable and determines potential impairment by comparing the carrying value of the assets with
expected net cash flows expected to be provided by operating activities of the business or related products. If the sum
of the expected undiscounted future net cash flows were less than the carrying value, NTIC would determine whether an
impairment loss should be recognized. An impairment loss would be measured by comparing the amount by which the
carrying value exceeds the fair value of the asset.

Foreign Currency Translation (Accumulated Other Comprehensive Loss)

The functional currency of each international joint venture and subsidiary is the applicable local currency. The
translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange
rates in effect at the balance sheet date and for revenue and expense accounts using an average monthly exchange rate.
Translation gains or losses are reported as an element of accumulated other comprehensive (loss) income.

NTIC (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, NTI Asean, Zerust Singapore, Zerust
Vietnam, Zerust Mexico, NTI Europe, and NTIC’s joint ventures) conducts all foreign transactions based on the U.S.
dollar. Since NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign
currency exchange rates would be reflected as a foreign currency translation adjustment and would not change the
equity in income from joint ventures reflected in NTIC’s consolidated statements of operations.

Stock-Based Compensation

NTIC recognizes compensation cost relating to share-based payment transactions, including grants of employee stock
options and transactions under NTIC’s employee stock purchase plan, in its consolidated financial statements. That cost
is measured based on the fair value of the equity or liability instruments issued. NTIC measures the cost of employee
services received in exchange for stock options or other stock-based awards based on the grant-date fair value of the
award and recognizes the cost over the period the employee is required to provide services for the award.

Inventory Valuation

NTIC’s inventories consist primarily of production materials and finished goods. NTIC purchases production materials
and finished goods based on forecasted demand and records inventory at the lower of cost or net realizable value. Cost
is determined by the first-in, first-out (FIFO) method. Management regularly assesses inventory valuation based on
current and forecasted usage, demand and pricing, shelf life, customer inventory-related contractual obligations, and
other considerations. If actual results differ from management estimates with respect to the actual or projected selling
of inventories at amounts less than their carrying amounts, NTIC would adjust its inventory balances accordingly.

Income Taxes

NTIC utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated
financial statements. Deferred income tax assets and liabilities are determined based on the differences between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in operations in the period that includes the enactment date.

NTIC records net deferred tax assets to the extent NTIC believes these assets will more likely than not be realized. In
making such a determination, NTIC considers all available positive and negative evidence, including future reversals of
existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent
operations, including the prior three-year history. In the event NTIC determines that it would be able to realize its
deferred income tax assets in the future in excess of their net recorded amount, NTIC makes an adjustment to the
deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Recent Accounting Pronouncements

See Note 2 to NTIC’s consolidated financial statements for a discussion of recent accounting pronouncements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices,
and interest rates.

Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the
applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the
normal course of business. NTIC’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian
Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for
services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies,
and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since
NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency
exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in
income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its
foreign currency exchange rate risk.

Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price
exposures are with a variety of plastic resins.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following items are included herein:

51
Report of Independent Registered Public Accounting Firm ....................................................................................
52
Consolidated Balance Sheets as of August 31, 2020 and 2019 ................................................................................
53
Consolidated Statements of Operations for the years ended August 31, 2020 and 2019 .........................................
54
Consolidated Statements of Comprehensive (Loss) Income for the years ended August 31, 2020 and 2019 ..........
55
Consolidated Statements of Equity for the years ended August 31, 2020 and 2019 ................................................
Consolidated Statements of Cash Flows for the years ended August 31, 2020 and 2019 ........................................
56
Notes to Consolidated Financial Statements ............................................................................................................ 57-77

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Northern
Technologies International Corporation and Subsidiaries:

Circle Pines, Minnesota

Opinions on the Financial Statements

We have audited the accompanying consolidated balance sheets of Northern Technologies International Corporation
and Subsidiaries (the “Company”) as of August 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income (loss), equity, and cash flows, for each of the two years in the period ended August 31, 2020,
and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
August 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period
ended August 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.

/s/ Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause, LLP)

We have served as the Company’s auditor since 2004.

Minneapolis, Minnesota
November 13, 2020

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 31, 2020 AND 2019

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Available for sale securities

Receivables:

Trade excluding joint ventures, less allowance for doubtful accounts

of $90,000 as of August 31, 2020 and $65,000 as of August 31, 2019

Trade joint ventures
Fees for services provided to joint ventures

Income taxes
Inventories
Prepaid expenses

Total current assets

PROPERTY AND EQUIPMENT, NET

OTHER ASSETS:

Investments in joint ventures
Deferred income taxes
Patents and trademarks, net
Operating lease right of use asset
Total other assets
Total assets

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable
Income taxes payable
Accrued liabilities:

Payroll and related benefits
Other

Current portion of operating lease
Total current liabilities

LONG-TERM LIABILITIES:
Operating lease, less current portion

Total long-term liabilities

COMMITMENTS AND CONTINGENCIES (Note 15)

EQUITY:

Preferred stock, no par value; authorized 10,000 shares; none issued and
outstanding
Common stock, $0.02 par value per share; authorized 15,000,000
shares as of August 31, 2020 and August 31, 2019;
issued and outstanding 9,099,990 and 9,086,816, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity

August 31, 2020

August 31, 2019

$ 6,403,032
5,544,722

5,856,758
3,565,258

8,072,212
475,900
927,286
19,907
10,961,796
797,495
33,202,350

7,110,789

24,090,826
209,729
802,006
658,788
25,761,349
66,074,488

3,205,241
310,922

1,314,978
880,118
386,345
6,097,604

272,443
272,443

—

182,000
17,415,043
42,472,810
(3,410,438)
56,659,415
3,045,026
59,704,441
66,074,488

9,779,518
824,473
1,268,000
457,018
10,488,728
1,062,609
33,302,362

7,358,159

24,207,339
1,634,258
1,008,969
—
26,850,566
67,511,087

4,505,531
6,759

1,857,971
1,471,532
—
7,841,793

—
—

—

181,736
16,013,338
44,992,719
(4,593,178)
56,594,615
3,074,679
59,669,294
67,511,087

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2020 AND 2019

NET SALES:
Net sales, excluding joint ventures
Net sales, to joint ventures
Total net sales
Cost of goods sold
Gross profit

JOINT VENTURE OPERATIONS:

Equity in income from joint ventures
Fees for services provided to joint ventures
Total joint venture operations

OPERATING EXPENSES:

Selling expenses
General and administrative expenses
Research and development expenses
Total operating expenses

OPERATING INCOME

INTEREST INCOME
INTEREST EXPENSE

INCOME BEFORE INCOME TAX EXPENSE

INCOME TAX EXPENSE

NET (LOSS) INCOME

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTERESTS

NET (LOSS) INCOME ATTRIBUTABLE TO NTIC

NET (LOSS) INCOME ATTRIBUTABLE TO NTIC PER COMMON
SHARE:

Basic
Diluted

WEIGHTED AVERAGE COMMON SHARES

ASSUMED OUTSTANDING:

Basic
Diluted

$
$

2020

2019

45,666,045
1,972,646
47,638,691
31,609,274
16,029,417

4,270,327
4,612,885
8,883,212

10,656,689
8,688,309
3,979,455
23,324,453

53,142,583
2,607,554
55,750,137
37,970,244
17,779,893

7,225,518
5,727,579
12,953,097

10,968,592
9,349,559
3,822,070
24,140,221

1,588,176

6,592,769

167,733
(16,034)

1,739,875

2,674,635

(934,760)

78,257
(13,567)

6,657,459

841,837

5,815,622

402,949

606,000

(1,337,709)

5,209,622

(0.15)
(0.15)

$
$

0.57
0.55

9,096,981
9,096,981

9,085,584
9,415,974

CASH DIVIDENDS DECLARED PER COMMON SHARE

0.13

0.24

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
YEARS ENDED AUGUST 31, 2020 AND 2019

NET (LOSS) INCOME

OTHER COMPREHENSIVE INCOME (LOSS) – FOREIGN

CURRENCY TRANSLATION ADJUSTMENT

COMPREHENSIVE INCOME

COMPREHENSIVE LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS

2020
(934,760)

2019
5,815,622

1,150,138

(1,003,643)

215,378

4,811,979

(370,347)

(598,336)

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NTIC

(154,969)

4,213,643

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
YEARS ENDED AUGUST 31, 2020 AND 2019

STOCKHOLDERS’ EQUITY

Common Stock

Amount

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Non-

Comprehensive

Controlling

Loss

Interests

Total

Equity

BALANCE AT AUGUST 31, 2018
Stock issued for employee stock
purchase plan

Stock option expense
Investment by non-controlling
Interest

Dividends paid to stockholders
Dividend received by non-controlling
interest

Net income

Other comprehensive loss

9,082,606

181,652

14,528,951

41,963,341

(3,597,199)

2,742,309

55,819,054

4,210

—

52,462

1,431,925

—

(2,180,244)

—

5,209,622

—

(995,979)

—

52,546

1,431,925

134,034

—

(2,180,244)

(400,000)

606,000

(7,664)

(400,000)

5,815,622

(1,003,643)

BALANCE AT AUGUST 31, 2019

9,086,816

$181,736

$16,013,338

$ 44,992,719

$ (4,593,178)

$ 3,074,679

$ 59,669,294

Stock options exercised
Stock issued for employee stock
purchase plan

Stock option expense

Dividends paid to stockholders
Dividend received by non-controlling
interest

Net (loss) income

Other comprehensive income (loss)

6,823

6,351

—

137

127

—

(137)

64,068

1,337,774

—

(1,182,200)

—

(1,337,709)

—

1,182,740

—

64,195

1,337,774

(1,182,200)

(400,000)

402,949

(32,602)

(400,000)

(934,760)

1,150,138

BALANCE AT AUGUST 31, 2020

9,099,990

$182,000

$17,415,043

$ 42,472,810

$ (3,410,438)

$ 3,045,026

$ 59,704,441

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2020 AND 2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

2020

2019

(934,760)

5,815,622

Stock-based compensation
Depreciation expense
Amortization expense
Change in allowance for doubtful accounts
Equity in income from joint ventures
Dividends received from joint ventures

Loss (gain) on disposal of property and patents

Deferred income taxes

Changes in current assets and liabilities:

Receivables:

Trade, excluding joint ventures
Trade, joint ventures
Fees for services provided to joint ventures
Income taxes

Inventories
Prepaid expenses and other
Accounts payable
Income tax payable
Accrued liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the sale of property and equipment
Purchase of available for sale securities
Proceeds from the sale of available for sale securities
Purchases of property and equipment
Investments in patents

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend received by non-controlling interest

Investment by non-controlling interest
Dividends paid on NTIC common stock

Proceeds from employee stock purchase plan
Proceeds from exercise of stock options
Net cash used in financing activities

1,337,774
836,601
231,624
25,000
(4,270,327)
5,672,099
173,810
1,424,529

1,680,611
348,573
340,714
424,002
(435,712)
279,312
(1,229,510)
302,641
(1,294,911)
4,912,070

2,190
(4,000,000)
2,020,536
(711,412)
(95,996)
(2,784,682)

(400,000)
—
(1,182,200)
64,195
—
(1,518,005)

1,431,925
841,236
261,724
—
(7,225,518)
5,039,041
(36,098)
(89,637)

(50,315)
(62,967)
89,255
(189,226)
(1,486,833)
744,323
682,786
(65,344)
(222,952)
5,477,022

—
(3,365,146)
3,100,000
(960,339)
(114,436)
(1,339,921)

(400,000)
134,034
(2,180,244)
52,546
—
(2,393,664)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS

NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

(63,109)

(49,702)

546,274
5,856,758

1,693,735
4,163,023

CASH AND CASH EQUIVALENTS AT END OF YEAR

6,403,032

5,856,758

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2020 AND 2019

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business – Northern Technologies International Corporation and its Subsidiaries (collectively, the Company)
develop and market proprietary environmentally beneficial products and services in over 60 countries either directly or via
a network of joint ventures, independent distributors, and agents. The Company’s primary business is corrosion prevention
marketed mainly under the ZERUST® brand. The Company has been selling its proprietary ZERUST® rust and corrosion
inhibiting products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets
for over 40 years and, more recently, has targeted and expanded into the oil and gas industry. The Company also sells a
portfolio of bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products
under the Natur-Tec® brand. These products are intended to reduce the Company’s customers’ carbon footprint and
provide environmentally sound disposal options. The Company’s two operating segments are ZERUST and Natur-Tec.

The Company participates, either directly or indirectly, in 19 active joint venture arrangements in North America, Europe,
and Asia. Each of these joint ventures generally manufactures and markets products in the geographic territory to which it
is assigned. While most of the Company’s joint ventures exclusively sell rust and corrosion inhibiting products, some of
the joint ventures also sell the Company’s Natur-Tec® resin compounds and finished products. The profits of joint ventures
are shared by the respective joint venture owners in accordance with their respective ownership percentages. The Company
typically owns 50% or less of its joint venture entities and does not control the decisions of these entities, including
dividend declaration or amount in any given year.

Impact of COVID-19 Pandemic – In March 2020, the World Health Organization declared the novel coronavirus (COVID-
19) outbreak a global pandemic. As a result of the COVID-19 pandemic and related government mandated restrictions on
the Company’s business as well as the businesses of its joint ventures, customers and suppliers, disruption to the
Company’s business and the manufacture and sale of its products and services has occurred and is expected to continue into
fiscal 2021.

Principles of Consolidation – NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative
basis. NTIC consolidates entities in which it concludes it has the power to direct the activities that most significantly
impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits that could be
significant to the entity. The consolidated financial statements include the accounts of Northern Technologies International
Corporation, its wholly-owned subsidiaries, Northern Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd.
(NTIC China), ZERUST-EXCOR MEXICO, S. de R.L. de C.V (Zerust Mexico), NTIC Europe GmbH (NTI Europe),
NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec India), NTIC’s majority-owned
subsidiary in Brazil, Zerust Prevenção de Corrosão S.A. (Zerust Brazil), NTIC’s majority-owned subsidiary in Sri Lanka,
Natur Tec Lanka (Pvt) Ltd (Natur Tec Lanka), and NTIC’s majority-owned holding company, NTI Asean LLC (NTI
Asean), Zerust Singapore Pte Ltd (Zerust Singapore) and Zerust Vietnam Co. Ltd (Zerust Vietnam). NTIC’s consolidated
financial statements do not include the accounts of any of its joint ventures.

Non-Controlling Interests – The Company owns 75% of Natur-Tec India, 75% of Natur Tec Lanka, 85% of Zerust Brazil,
60% of NTI Asean, 60% of Zerust Singapore Pte Ltd, and 60% of Zerust Vietnam Co. Ltd. The remaining ownership of
the consolidated entities are accounted for as non-controlling interests and reported as part of equity in the consolidated
financial statements. The Company allocates gains and losses to the non-controlling interest even when such allocation
results in a deficit balance, reducing the losses attributed to the controlling interest. Changes in ownership interests are
treated as equity transactions if the Company maintains control.

Net Sales – The Company includes net sales to its joint ventures and net sales to unaffiliated customers as separate line
items on its consolidated statements of operations. There are no sales originating from the Company’s joint ventures
included in the amount, as the Company’s investments in its joint ventures are accounted for using the equity method.

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance creating Accounting Standards
Codification (ASC) Section 606, Revenue from Contracts with Customers (ASC 606), which establishes a comprehensive
new model for the recognition of revenue from contracts with customers. This model is based on the core principle that
revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services.

On September 1, 2018, the Company adopted ASC 606 for all customer contracts using the modified retrospective method.
To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five
steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue
when or as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when
it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to, or
services it performs for, the customer.

The adoption of ASC 606 did not impact the previously reported financial statements in any prior period or result in a
cumulative effect adjustment to retained earnings. Therefore, the adoption of the standard did not impact the Company’s
revenue recognition process. Generally, the Company’s performance obligations are satisfied when the customers take
possession of the products, which normally occurs at the shipping point or destination depending on the terms of the
contracts. The Company’s services are generally sold based upon quotes or contracts with customers that include a fixed or
determinable price, and sales arrangements do not contain any significant financing component for its customers. The
Company does not recognize revenue related to product warranties, nor does the Company incur significant contract costs.
Customer arrangements do not generate contract assets or liabilities.

Changes to the Company’s significant accounting policies as a result of adopting ASC 606 are discussed below.

Revenue Recognition – Revenue is measured based on consideration specified in the contract with a customer, adjusted for
any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash
consideration, consideration paid or payable to customers, and significant financing components. Revenue from all
customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a
customer.

Individually promised goods and services in a contract are considered a distinct performance obligation and accounted for
separately if the customer can benefit from the individual good or service on its own or with other resources that are readily
available to the customer and the good or service is separately identifiable from other promises in the arrangement. When
an arrangement includes multiple performance obligations, the consideration is allocated between the performance
obligations in proportion to their estimated standalone selling price. Costs related to products delivered are recognized in
the period incurred, unless criteria for capitalization of costs are met. Costs of revenues consist primarily of direct labor,
manufacturing overhead, materials, and components. The Company does not incur significant upfront costs to obtain a
contract. If costs to obtain a contract were to become material, the costs would be recorded as an asset and amortized to
expense in a manner consistent with the related recognition of revenue.

The Company excludes government assessed and imposed taxes on revenue generating transactions that are invoiced to
customers from revenue. The Company includes freight billed to customers in revenue. Shipping and handling costs
associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment
cost and are included in cost of goods sold.

The timing of revenue recognition, billing, and cash collections results in accounts receivable on the consolidated balance
sheet.

Performance Obligations - A performance obligation is a promise in a contract to transfer a distinct good or service to the
customer. A contract’s transaction price is allocated to each distinct performance obligation in proportion to its standalone
selling price and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s various
performance obligations and the timing or method of revenue recognition are discussed below. The Company’s technical
service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to
analyze their specific needs and develop systems to meet their performance requirements.

The Company sells its products to both distributors and end-users. Each unit of product delivered under a customer order
represents a distinct and separate performance obligation, as the customer can benefit from each unit on its own or with
other resources that are readily available to the customer, and each unit of product is separately identifiable from other
products in the arrangement.

The transaction price for the Company’s products is the invoiced amount. The Company does not have variable
consideration in the form of refunds, credits, rebates, price concessions, pricing incentives, or other items impacting
transaction price. The purchase order pricing in arrangements with customers is deemed to approximate standalone selling
price; therefore, the Company does not need to allocate proceeds on a relative standalone selling price allocation between
performance obligations. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose
information about remaining performance obligations that have original expected durations of one year or less. There are
no material obligations that extend beyond one year.

Revenue is recognized when transfer of control occurs, as defined by the terms in the customer agreement. The Company
immediately recognizes incidental items that are immaterial in the context of the contract. The Company has applied the
practical expedient in paragraph 606-10-25-16A and does not assess if immaterial items are promised goods or services.
The Company has also applied the practical expedient in paragraph 606-10-32-18 regarding the adjustment of the promised
amount of consideration for the effects of a significant financing component when the customer pays for that good or
service within one year or less, as the Company does not have any significant financing components in its customer
arrangements since payment is received at or shortly after the point of sale, generally thirty to ninety days.

The Company estimates returns based on an analysis of historical experience if the right to return products is granted to its
customers. The Company does not record a return asset, as non-conforming products are generally not returned. The
Company’s return policy does not vary by geography. The customer has no rotation or price protection rights, and the
Company is not under a warranty obligation.

Sales Commissions – Sales commissions paid to sales representatives are eligible for capitalization, as they are incremental
costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the
expected margin on the transaction. The Company has elected to apply the practical expedient provided by ASC 340-40-
25-4 and recognize the incremental costs of obtaining contracts as an expense when incurred, as the amortization period of
the assets that would have otherwise been recognized is one year or less. The Company records these costs as a selling
expense.

Product Warranty – The Company offers warranties on various products and services. These warranties are assurance type
warranties that are not sold on a standalone basis; therefore, they are not considered distinct performance obligations. The
Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at
the time the revenue is recognized for the product sale.

International Revenue – The Company markets its products to numerous countries in North America, Europe, Latin
America, Asia, and other parts of the world. See Note 11, Segment and Geographical Information, for information
regarding revenue disaggregation by geography.

Trade Receivables – Payment terms for the Company’s unaffiliated customers are determined based on credit risk and vary
by customer. The Company typically offers standard payment terms to unaffiliated customers of net 30 days. The
Company does not accrue interest on past due accounts receivable. The Company reviews the credit histories of its
customers before extending unsecured credit. The Company presents accounts and notes receivable net of an allowance for
doubtful accounts. Each quarter, the Company prepares an analysis of its ability to collect outstanding receivables that
provides a basis for an allowance estimate for doubtful accounts. In doing so, the Company evaluates the age of its
receivables, past collection history, current financial conditions of key customers and its joint ventures, and economic
conditions. Based on this evaluation, the Company establishes a reserve for specific accounts and notes receivable that it
believes are uncollectible, as well as an estimate of uncollectible receivables not specifically known. The Company
believes that an analysis of historical trends and its current knowledge of potential collection problems provide the
Company with sufficient information to establish a reasonable estimate for an allowance for doubtful accounts. In the event
the Company determines that a smaller or larger uncollectible accounts reserve is appropriate, the Company records a credit
or charge to selling expense in the period that it made such determination. Accounts receivable have been reduced by an
allowance for uncollectible accounts of $90,000 as of August 31, 2020 and $65,000 as of August 31, 2019. Accounts are

considered past due based on terms agreed upon between the Company and the customer. Accounts receivable are written-
off only after all collection attempts have failed and are based on individual credit evaluation and specific circumstances of
the customer.

Trade Receivables from Joint Ventures – Trade receivables from joint ventures arise from sales of products the Company
makes to its joint ventures. Payment terms for the Company’s joint ventures also are determined based on credit risk;
however, additional consideration is given to the individual joint venture due to the transportation time associated with
ocean delivery of most products and certain other factors. Generally, accounts receivable from the Company’s joint
ventures unpaid after 90 days are considered past due. The Company does not accrue interest on past due balances. The
Company periodically reviews amounts due from its joint ventures for collectability and, based on past experience and
continuous review of the balances due, determined that an allowance for doubtful accounts related to its joint venture
receivables was not necessary as of August 31, 2020 or 2019.

Fees for Services Provided to Joint Ventures – The Company provides services to its joint ventures including consulting,
legal, travel, insurance, technical, and marketing services based on licensing or other agreements with its joint ventures.
The Company receives fees for the services it provides to its joint ventures. The fees for services received by the Company
from its joint ventures are generally based on either a flat fee or a percentage of net sales by the Company’s joint ventures
depending on local laws and tax regulations. Under the Company’s agreements with its joint ventures, amounts are earned
when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in
obligation for the joint venture to pay the royalty and recognition of the fee by the Company. The Company reviews the
financial situation of each of its joint ventures to assist in the likelihood of collections on amounts earned. The Company
accounts for these fees on a cash basis if uncertainty exists surrounding the collection of such fees.

Cash and Cash Equivalents – The Company includes as cash and cash equivalents highly liquid, short-term investments
with maturity of three months or less when purchased, which are readily convertible into known amounts of cash. The
Company maintains its cash in high quality financial institutions. The balances, at times, may exceed federally insured
limits.

Available for Sale Securities – Available for sale securities are recorded at fair value. Unrealized holding gains and losses
on available for sale securities are not significant.

Inventories – Inventories are recorded at the lower of cost (first-in, first-out basis) or net realizable value.

Property and Depreciation – Property and equipment are stated at cost. Depreciation is computed using the straight-line
method based on the estimated service lives of the various assets as follows:

Buildings and improvements
Machinery and equipment

5-30 years
3-10 years

Patents and Trademarks – Patents and trademarks, including acquisition costs, are stated at cost, less accumulated
amortization. Amortization is computed using the straight-line method over the estimated useful lives of the respective
assets. Upon retirement, the cost of assets disposed and the related accumulated amortization are removed from the
accounts, and any resulting gain or loss is credited or charged to operations.

Investments in Joint Ventures – Investments in the Company’s joint ventures are accounted for using the equity method.
Under the equity method, investments are initially recorded at cost and are adjusted for dividends, distributed and
undistributed earnings and losses, changes in foreign currency exchange rates, and additional investments. In the event the
Company’s share of a joint venture’s cumulative losses exceeds the Company’s investment balance, the balance is reported
at zero value until proportionate income exceeds the losses. The Company assesses its joint ventures for impairment on an
annual basis as of August 31 of each year as part of its fiscal year end analysis. In addition to the annual review for
impairment, the Company reviews the operating results of each joint venture on a quarterly basis in comparison to its
historical operating results and its accrual of fees for services provided to joint ventures. If the operating results of a joint
venture do not meet financial performance expectations, an additional evaluation is performed on the joint venture. The
Company’s evaluation of its investments in joint ventures requires the Company to make assumptions about future cash
flows of its joint ventures. These assumptions require significant judgment, and actual results may differ from assumed or
estimated amounts. All investments in joint ventures had positive equity as of August 31, 2020 and 2019. The Company

considers any of its joint ventures to be significant and discloses entity specific financial information if the joint venture’s
income or assets make up more than 20% of the Company’s total assets or income.

The Company classifies distributions received from its joint ventures based on the nature of the distributions, generally, in
operating activities on the consolidated statements of cash flows.

If the Company is no longer able to exercise significant influence over operating and financial policy of a joint venture
previously accounted for under the equity method, it maintains the investment at the carrying value as of the date that
significant influence no longer exists and discontinues accruing the proportionate earnings or losses of the investment.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value is
calculated based on publicly available market information or other estimates determined by management. The Company
employs a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in
evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, the Company
evaluates, among other factors, general market conditions, credit quality, the duration and extent to which the fair value is
less than cost, and for equity securities, the Company’s intent and ability to hold, or plans to sell, the investment. The
Company also considers specific adverse conditions related to the financial health of and business outlook for the investee,
including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a
decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense),
and a new cost basis in the investment is established.

Recoverability of Long-Lived Assets – The Company reviews its long-lived assets whenever events or changes in
circumstances indicate the carrying amount of the assets may not be recoverable. The Company determines potential
impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by
operating activities of the business or related products. If the sum of the expected undiscounted future net cash flows is less
than the carrying value, the Company evaluates whether an impairment loss should be recognized. An impairment loss is
measured by comparing the amount by which the carrying value exceeds the fair value of the asset. When evaluating assets
for impairment, the Company groups long-lived assets with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included
in the consolidated financial statements. Deferred income tax assets and liabilities are determined based on the differences
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in operations in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be
realized. In making such a determination, the Company considers all available positive and negative evidence, including
future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and
results of recent operations. In the event the Company determines that it would be able to realize its deferred assets in the
future in excess of their net recorded amount, the Company makes an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby the Company determines whether
it is more likely than not that the tax positions will be sustained based on the technical merits of the position and those tax
positions that meet the more-likely-than-not recognition threshold. The Company recognizes the largest amount of tax
benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Foreign Currency Translation (Accumulated Other Comprehensive Income (Loss)) – The functional currency of NTIC
China, Zerust Brazil, Natur-Tec India, Natur Tec Lanka, Zerust Mexico, Zerust Singapore, Zerust Vietnam, NTI Europe,
and each unconsolidated international joint venture is the applicable local currency. The translation of the applicable
foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance
sheet date and for revenue and expense accounts using an average monthly exchange rate. Translation gains or losses are
reported as an element of other comprehensive income (loss).

The Company (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur Tec Lanka, Zerust Singapore, Zerust
Vietnam, NTI Asean, Zerust Mexico, NTI Europe, and NTIC’s joint ventures) conducts all foreign transactions based on
the U.S. dollar. Since investments in joint ventures are accounted for using the equity method, any changes in foreign
currency exchange rates are reflected as a foreign currency translation adjustment and do not change the equity in income
from joint ventures reflected in the Company’s consolidated statements of operations.

Fair Value of Financial Instruments – The carrying value of cash and cash equivalents, available for sale securities, short-
term accounts and notes receivable, notes payable, trade accounts payables, and other accrued expenses approximate fair
value because of the short maturity of those instruments.

Shipping and Handling – The Company records all amounts billed to customers in a sales transaction related to shipping
and handling as sales. The Company records costs related to shipping and handling in cost of goods sold.

Research and Development – The Company expenses all costs related to product research and development as incurred.

Common Stock – The Company issues authorized but unissued shares of common stock upon the exercise of stock options.

Stock Split – On June 3, 2019, NTIC’s Board of Directors declared a two-for-one stock split of NTIC’s common stock
effected in the form of a 100% share dividend distributed on June 28, 2019 to record holders as of June 17, 2019. Earnings
and dividends declared per share and weighted average shares outstanding are presented in this report after the effect of the
100 percent stock dividend. The two-for-one stock split is retroactively reflected in the share amounts in all periods
presented in this report.

Stock-Based Compensation – The Company recognizes compensation cost relating to share-based payment transactions,
including grants of employee stock options and transactions under the Company’s employee stock purchase plan, in its
consolidated financial statements. That cost is measured based on the fair value of the equity or liability instruments
issued. The Company measures the cost of employee services received in exchange for stock options and other stock-based
awards based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to
provide services for the award (generally the vesting term).

Subsequent Events – The Company has evaluated events occurring after the date of the consolidated financial statements for
events requiring disclosure in the consolidated financial statements.

Use of Estimates – The preparation of the consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements Adopted

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2016-02, Leases. The guidance in ASU 2016-02 supersedes the lease recognition requirements in the Accounting
Standards Codification (ASC) Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising
from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. This
standard became effective for the Company on September 1, 2019.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220)
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a
reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the
Tax Cuts and Jobs Act (Tax Reform Act) that are stranded in accumulated other comprehensive income. This standard also
requires certain disclosures about stranded tax effects. ASU No. 2018-02, however, does not change the underlying
guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations.

ASU No. 2018-02 was adopted by the Company commencing with first quarter of the Company’s fiscal year 2020, and it
did not have any impact on its consolidated financial statements.

The FASB has subsequently issued the following amendments to ASU 2016-02, which have the same effective date and
transition date of September 1, 2019, and which are collectively referred to as the new leasing standards:

(cid:120) ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which

permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements
that existed or expired prior to adoption of Topic 842 and that were not previously accounted for as leases under
the prior standard, ASC 840, Leases.

(cid:120) ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends certain narrow aspects of the

guidance issued in ASU 2016-02.

(cid:120) ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for a transition approach to initially
apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of
retained earnings in the period of adoption as well as an additional practical expedient for lessors to not separate
non-lease components from the associated lease component.

(cid:120) ASU No. 2018-20, Narrow-Scope Improvements for Lessors, which contains certain narrow scope improvements

to the guidance issued in ASU 2016-02.

Additional information and disclosures required by this new standard are contained in Note 15, titled “Commitments and
Contingencies.”

The Company adopted the new leasing standards on September 1, 2019, using a modified retrospective transition approach
to be applied to leases existing as of, or entered into after, September 1, 2019; and, consequently, financial information will
not be updated and the disclosures required under Topic 842 will not be provided for dates and periods prior to September
1, 2019. The Company has reviewed its existing lease contracts and the impact of the new leasing standards on its
consolidated results of operations, financial position and disclosures. Upon adoption of the new leasing standards, the
Company recognized a lease liability and related right-of-use asset on its consolidated balance sheet of approximately
$600,000 as of September 1, 2019.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises
guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued
ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in May 2019, issued ASU No. 2019-05, and in
November 2019, issued ASU No. 2019-11, which amended the standard. The new standard introduces an approach, based
on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model
for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected
credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including
trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit
exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-
effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.
The Company is still evaluating the impact of this ASU.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has
adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will
have a material impact on the Company’s consolidated financial position or operating results.

INVENTORIES

Inventories consisted of the following:

Production materials
Finished goods

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Land
Buildings and improvements
Machinery and equipment

Less accumulated depreciation

PATENTS AND TRADEMARKS, NET

Patents and trademarks, net consisted of the following:

Patents and trademarks
Less accumulated amortization

August 31, 2020
$ 3,866,791
7,095,006
$ 10,961,796

August 31, 2019
1,980,816
8,507,912
$ 10,488,728

August 31, 2020
$ 310,365
8,167,783
4,940,912
13,419,060
(6,308,271)
$ 7,110,789

August 31, 2019
310,365
7,749,980
4,903,664
12,964,009
(5,605,850)
7,358,159

August 31, 2020
$ 2,907,852
(2,105,846)
$ 802,006

August 31, 2019
2,938,876
(1,929,907)
1,008,969

Patent and trademark costs are amortized over seven years. Costs incurred related to patents and trademarks are capitalized
until filed and approved, at which time the amounts capitalized to date are amortized, and any further costs, including
maintenance costs, are expensed as incurred. Amortization expense was $231,624 and $261,724 for the years ended
August 31, 2020 and 2019, respectively. Amortization expense is estimated to be $200,000 in each of the next four fiscal
years.

INVESTMENTS IN JOINT VENTURES

The consolidated financial statements of the Company’s foreign joint ventures are initially prepared using the accounting
principles accepted in the respective joint ventures’ countries of domicile. Amounts related to foreign joint ventures
reported in the below tables and the accompanying consolidated financial statements have subsequently been adjusted to
conform with accounting principles generally accepted in the United States of America in all material respects. All material
profits on sales recorded that remain on the balance sheet from the Company to its joint ventures and from joint ventures to
other joint ventures have been eliminated for financial reporting purposes.

The Company considers the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte
GmbH (EXCOR) and the following other joint ventures in France, Finland, India and Thailand, respectively, to be
individually significant to the Company’s consolidated assets and income as of August 31, 2020: ACOBAL SAS, ZERUST
OY, HARITA-NTI LTD and ZERUST SPECIALTY TECH CO. LTD. Financial information from the audited and

unaudited financial statements of EXCOR and the Company’s joint ventures in France, Finland, India and Thailand, as well
as all the Company’s other joint ventures, are summarized as follows:

Total

EXCOR

FRANCE FINLAND

INDIA

THAILAND OTHER

As of August 31, 2020

Current assets
Total assets
Current liabilities
Noncurrent liabilities
Joint ventures’ equity
Northern Technologies International
Corporation’s share of joint ventures’
equity
Northern Technologies International
Corporation’s share of joint ventures’
undistributed earnings

Net sales
Gross profit
Net income
Northern Technologies International
Corporation’s share of equity in
income of joint ventures
Northern Technologies International
Corporation’s dividends received from
joint ventures

$ 55,825,418 $ 25,742,619 $4,099,160 $1,955,879 $4,010,855 $4,022,399 $15,994,506
4,055,451 16,413,073
4,088,235
332,275
3,062,119 11,992,563

4,873,484 2,261,147 4,242,660
415,496 1,007,529
2,073,710
32,999
—
2,799,774 1,845,651 3,202,132

28,449,772
2,424,565
—
26,025,207

60,295,587
11,002,867
365,274
48,927,446

993,332
—

—

24,090,826

13,012,606

1,399,887

922,814

1,603,013

1,531,060

5,621,446

21,855,747 12,981,701

1,399,887

902,814

738,191

1,429,060

4,404,094

Total

EXCOR

Fiscal Year Ended August 31, 2020
FRANCE FINLAND
INDIA

THAILAND OTHER

$ 87,030,062 $ 32,546,402 $8,133,294 $3,088,865 $5,481,303 $ 6,471,831 $31,308,367
2,046,478 11,271,171
1,184,834

3,061,433 1,916,001 2,498,196
697,349
419,728

18,739,471
5,266,541

39,532,750
8,545,473

503,884

473,137

4,270,327

2,622,423

237,490

209,972

349,218

253,192

598,032

5,672,099

4,675,850

—

325,635

261,220

160,074

249,320

Total
59,162,834
63,326,703
14,145,499
20,797
49,160,407

As of August 31, 2019
EXCOR

29,139,787
31,666,841
3,573,160
—
28,093,681

All Other

30,023,047
31,659,862
10,572,339
20,797
21,066,726

24,207,339

14,046,842

10,160,497

22,178,126

14,015,937

8,162,189

Total
114,635,435
51,312,013
14,688,999

Fiscal Year Ended August 31, 2019
EXCOR

47,015,841
25,622,261
10,827,448

All Other

67,619,594
25,689,752
3,861,551

7,225,518

5,415,362

1,810,156

5,039,041

3,345,600

1,693,441

The Company did not make any joint venture investments during fiscal 2020 or fiscal 2019.

CORPORATE DEBT

The Company has a revolving line of credit with PNC Bank, National Association (PNC Bank) of $3,000,000. No amounts
were outstanding under the line of credit as of both August 31, 2020 and 2019. At the option of the Company, outstanding
advances under the line of credit bear interest at either (a) an annual rate based on LIBOR plus 2.15% for the applicable
LIBOR interest period selected by the Company or (b) at the rate publicly announced by PNC Bank from time to time as its
prime rate.

The line of credit is governed under a loan agreement. The loan agreement contains standard covenants, including
affirmative financial covenants, such as the maintenance of a minimum fixed charge coverage ratio, and negative
covenants, which, among other things, limit the incurrence of additional indebtedness, loans and equity investments,
disposition of assets, mergers and consolidations, and other matters customarily restricted in such agreements. Under the
loan agreement, the Company is subject to a minimum fixed charge coverage ratio of 1.10:1.00. As of August 31, 2020,
the Company was in compliance with all debt covenants.

The revolving credit facility allows the Company to request that PNC Bank issue letters of credit up to $1,200,000. The
Company did not have any letters of credit reserved against the available letters of credit balance as of August 31, 2020 and
2019 with PNC Bank. The availability of advances under the line of credit will be reduced by the face amount of any letter
of credit issued and outstanding (whether or not drawn) under the revolving credit facility.

On December 16, 2019, the Company and PNC Bank extended the maturity date of the line of credit from January 7, 2020
to January 7, 2021. All other terms of the line of credit and the loan agreement and other documents evidencing the line of
credit remain the same.

As of August 31, 2020, the Company had $88,831 of letters of credit with JP Morgan Chase Bank that are performance
based and set to expire between 2020 and 2022.

STOCKHOLDERS’ EQUITY

On June 3, 2019, the Company’s Board of Directors declared a two-for-one stock split of the Company’s common stock
effected in the form of a 100% share dividend distributed on June 28, 2019 to record holders as of June 17, 2019. All share
and per share values have been adjusted to retroactively reflect the effect of the two-for-one stock split.

During fiscal 2020, the Company’s Board of Directors declared cash dividends on the following dates in the following
amounts to holders of record of the Company’s common stock as of the following record dates:

Declaration Date
October 22, 2019
January 22, 2020

Amount
$0.065
$0.065

Record Date
November 6, 2019
February 5, 2020

Payable Date
November 20, 2019
February 19, 2020

On April 23, 2020, the Company announced the temporary suspension of its quarterly cash dividend pending clarity on the
COVID-19 pandemic. Therefore, the Company did not declare a cash dividend during the quarter ended May 31, 2020 or
August 31, 2020.

During fiscal 2019, the Company’s Board of Directors declared cash dividends on the following dates in the following
amounts to holders of record of the Company’s common stock as of the following record dates:

Declaration Date
October 24, 2018
January 23, 2019
April 25, 2019
July 24, 2019

Amount
$0.06
$0.06
$0.06
$0.06

Record Date
November 7, 2018
February 6, 2019
May 9, 2019
August 7, 2019

Payable Date
November 21, 2018
February 22, 2019
May 23, 2019
August 21, 2019

On January 15, 2015, the Company’s Board of Directors authorized the repurchase of up to $3,000,000 in shares of
common stock through open market purchases or unsolicited or solicited privately negotiated transactions. This program
has no expiration date but may be terminated by the Company’s Board of Directors at any time. As of August 31, 2020, up
to $2,640,548 in shares of common stock remained available for repurchase under the stock repurchase program.

During fiscal 2020, the Company did not repurchase or retire any shares of its common stock. During fiscal 2020, stock
options to purchase an aggregate of 11,974 shares of common stock were exercised at a weighted average exercise price of
$5.13 per share; some of the options were exercised on a cashless basis, resulting in the net issuance of 6,823 shares of
common stock.

During fiscal 2019, the Company did not repurchase or retire any shares of its common stock. During fiscal 2019, no stock
options to purchase shares of common stock were exercised.

NET (LOSS) INCOME PER COMMON SHARE

Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of
common shares outstanding. Diluted net (loss) income per share assumes the exercise of stock options using the treasury
stock method, if dilutive.

The following is a reconciliation of the net income per share computation for fiscal 2020 and fiscal 2019:

Numerator:
Net (loss) income attributable to NTIC

August 31, 2020
(1,337,709)

August 31, 2019
5,209,622

Denominator:
Basic-weighted shares outstanding
Weighted shares assumed upon exercise of
stock options
Diluted – weighted shares outstanding

9,096,981

-
9,096,981

9,085,584

330,390
9,415,974

Basic net (loss) income per share:
Diluted net (loss) income per share:

$
$

(0.15)
(0.15)

$
$

0.57
0.55

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

The dilutive impact summarized above relates to the periods when the average market price of the Company’s common
stock exceeded the exercise price of the potentially dilutive option securities granted. Net income per common share was
based on the weighted average number of common shares outstanding during the periods when computing the basic net
income per share. When dilutive, stock options are included as equivalents using the treasury stock market method when
computing the diluted net income per share. Excluded from the computation of diluted net income per share as of August
31, 2020 were options outstanding to purchase 1,127,968 shares of common stock due to the net loss for the period.
Excluded from the computation of diluted net income per share as of August 31, 2019 were options outstanding to purchase
141,768 shares of common stock.

10.

STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans under which stock options or other stock-based awards have been
granted: the Northern Technologies International Corporation 2019 Stock Incentive Plan (the 2019 Plan), which was
approved by stockholders at the 2019 annual meeting of stockholders, the Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) and the Northern Technologies International Corporation
Employee Stock Purchase Plan (the ESPP). The 2019 Plan replaced the 2007 Plan with respect to future grants; and,
therefore, no further awards may be made under the 2007 Plan. The Compensation Committee of the Board of Directors
and the Board of Directors administer these plans.

The 2019 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights,
restricted stock, stock unit awards, performance awards, and stock bonuses to eligible recipients to enable the Company and
its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company and
to reward those individuals who contribute to the achievement of the Company’s economic objectives. Subject to
adjustment as provided in the 2019 Plan, up to a maximum of 800,000 shares of the Company’s common stock are issuable
under the 2019 Plan. Options granted generally have a term of ten years and become exercisable over a one- or three- year
period beginning on the one-year anniversary of the date of grant. Options are granted at per share exercise prices equal to
the market value of the Company’s common stock on the date of grant. The Company issues new shares upon the exercise
of options. During the fiscal years ended August 31, 2020 and 2019, the Company granted stock options under the 2019
Plan to purchase an aggregate of 300,770 and 141,767 shares of its common stock to various employees and directors,
respectively. As of August 31, 2020, 499,230 shares of common stock remained available under the 2019 Plan.

The maximum number of shares of common stock of the Company available for issuance under the ESPP is 200,000
shares, subject to adjustment as provided in the ESPP. The ESPP provides for six-month offering periods beginning on
September 1 and March 1 of each year. The purchase price of the shares is 90% of the lower of the fair market value of
common stock at the beginning or end of the offering period. This discount may not exceed the maximum discount rate
permitted for plans of this type under Section 423 of the Internal Revenue Code of 1986, as amended. The ESPP is
compensatory for financial reporting purposes. The Company issued 2,754 and 2,462 shares on March 1, 2020 and 2019,
respectively, and 3,597 and 1,748 shares on September 1, 2019 and 2018, respectively, under the ESPP. As of August 31,
2020, 84,693 shares of common stock remained available for sale under the ESPP.

The fair value of option grants is determined at the date of grant using the Black-Scholes option pricing model with the
assumptions listed below. The volatility factor used in the Black-Scholes option pricing model is based on historical stock
price fluctuations, and the risk-free interest rate is based on U.S. treasury rates appropriate for the expected term. Dividend
yield and expected volatility are estimated using historical amounts that are anticipated to be consistent with current values.
Expected life of the option is based on the life of the option agreements. Based on these valuations, the Company
recognized compensation expense of $1,337,774 and $1,431,925 during fiscal 2020 and fiscal 2019, respectively, related to
the options that vested during such time. As of August 31, 2020, the total compensation cost for non-vested options not yet
recognized on the Company’s consolidated statements of operations was $20,834, which is expected to be recognized
during fiscal 2021, based on outstanding options as of August 31, 2020. Future option grants will impact the compensation
expense recognized. Stock-based compensation expense is included in general and administrative expense on the
consolidated statements of operations.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model with the
following assumptions and results for the grants:

Dividend yield
Expected volatility
Expected life of option
Weighted average risk-free interest rate

Fiscal Year 2020
2.41%
45.2%
10 years
1.40%

Fiscal Year 2019
1.32%
45.8%
10 years
2.75%

Stock option activity during the periods indicated was as follows:

Outstanding at August 31, 2018
Options granted
Options exercised
Options terminated

Outstanding at August 31, 2019
Options granted
Options exercised
Options terminated

Weighted Average

Exercise Price

Aggregate
Intrinsic Value

7.29
18.23
—
—

9.13
10.87
5.13
—

Number of
Shares (#)
697,406
141,767
—
—

839,173
300,770
(11,975)
—

Number of
Shares (#)

Weighted Average

Exercise Price

Aggregate
Intrinsic Value

Outstanding at August 31, 2020

1,127,968

9.63

$ 1,091,425

Exercisable at August 31, 2020

810,363

9.18

$ 1,091,425

*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

The weighted average per share fair value of options granted during fiscal 2020 and fiscal 2019 was $9.63 and $9.02,
respectively. The weighted average remaining contractual life of the options outstanding and exercisable as of August 31,
2020 was 6.02 years and 5.90 years, respectively.

11.

SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s business is organized into
two reportable segments: ZERUST® and Natur-Tec®. The Company has been selling its proprietary ZERUST® rust and
corrosion inhibiting products and services to the automotive, electronics, electrical, mechanical, military, and retail
consumer markets for over 40 years and, more recently, has targeted and expanded into the oil and gas industry. The
Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resins and finished products
under the Natur-Tec® brand.

The following tables present the Company’s business segment information:

ZERUST® net sales
Natur-Tec® net sales
Total net sales

Fiscal 2020
34,474,535
13,164,156

Fiscal 2019
38,174,712
17,575,425

47,638,691

55,750,137

The following table sets forth the Company’s cost of goods sold by segment:

Fiscal 2020

Fiscal 2019

Direct cost of goods sold
ZERUST®
$ 18,717,684
Natur-Tec®
10,168,051
2,723,539
Indirect cost of goods sold
Total net cost of goods sold $ 31,609,274

$ 21,505,335
13,691,038
2,773,871
$ 37,970,244

The Company utilizes product net sales and direct and indirect cost of goods sold for each product in reviewing the
financial performance of a product type. Further allocation of Company expenses or assets, aside from amounts presented
in the tables above, is not utilized in evaluating product performance, nor does such allocation occur for internal financial
reporting.

Sales to the Company’s joint ventures are included in the foregoing geographic and segment information, however, sales by
the Company’s joint ventures to other parties are not included. The foregoing geographic and segment information
represents only sales and cost of goods sold recognized directly by the Company.

All joint venture operations, including equity in income, fees for services, and related dividends, are related to ZERUST®
products and services.

Geographic Information

Net sales by geographic location for fiscal 2020 and fiscal 2019 were as follows:

Inside the U.S.A. to unaffiliated customers
Outside the U.S.A. to:

Joint ventures in which the Company is a
shareholder directly and indirectly

Unaffiliated customers

Fiscal Year Ended August 31,

2020
20,218,213

2019

24,560,459

1,972,646
25,447,832
47,638,691

2,607,554
28,582,124
55,750,137

Net sales by geographic location are based on the location of the customer.

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to
joint ventures, respectively, were as follows:

Germany
Japan
Poland
Sweden
Thailand
France
Czech Republic
South Korea
Finland
United Kingdom
India
Other

Fiscal 2020

$ 843,752
628,889
553,198
372,017
328,452
310,661
270,032
266,703
256,375
255,121
250,976
276,709
$ 4,612,885

Fiscal 2019
$ 852,526
748,489
704,942
589,654
418,334
430,537
345,798
346,244
281,295
319,671
350,172
339,917
$ 5,727,579

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by
the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information
represents only sales and cost of goods sold recognized directly by the Company.

See Note 6 for additional details on geographical information regarding equity in income from joint ventures.

The geographical distribution of total long-lived assets and net sales is as follows:

China
Other
United States

Total long-lived assets

At August 31, 2020
$

376,088
172,833
6,561,868
7,110,789

At August 31, 2019

337,162
178,087
6,842,910
7,358,159

China
Brazil
India
Other
United States

Total net sales

Fiscal Year Ended
August 31, 2020
13,409,770
2,753,930
5,655,797
5,600,982
20,218,212
47,638,691

Fiscal Year Ended
August 31, 2019
13,030,298
3,151,509
8,109,468
6,898,403
24,560,459
55,750,137

Long-lived assets located in China, Brazil, Germany, and India consist of property and equipment. These assets are
periodically reviewed to assure the net realizable value from the estimated future production based on forecasted sales
exceeds the carrying value of the assets.

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by
the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information
represents only sales recognized directly by the Company and sold in that geographic territory.

All joint venture operations, including equity in income, fees for services, and related dividends, are primarily related to
ZERUST® products and services.

12.

RETIREMENT PLAN

The Company has a 401(k) employee savings plan. Employees who meet certain age and service requirements may elect to
contribute up to 15% of their salaries. The Company typically contributes the lesser of 50% of the participant’s
contributions or 3.5% of the employee’s salary. The Company recognized expense for the savings plan of $234,534 and
$228,605 for fiscal 2020 and fiscal 2019, respectively.

13.

RELATED PARTY TRANSACTIONS

During both fiscal 2020 and fiscal 2019, the Company made consulting payments of $144,000 to Bioplastic Polymers LLC,
an entity owned by Ramani Narayan, Ph.D., a director of the Company.

14.

INCOME TAXES

The provision for income taxes for the fiscal years ended August 31, 2020 and 2019 was approximately as follows:

Current:

Federal
State
Foreign

Deferred:
Federal
State
Foreign

Fiscal Year Ended August 31,
2020

2019

— $

23,000
1,226,000

1,249,000

1,501,000
101,000
(177,000)
1,425,000

2,674,000 $

—
48,000
902,000

950,000

(315,000)
(21,000)
228,000
(108,000)

842,000

Reconciliations of the expected federal income tax at the statutory rate of 21.0% with the provisions for income taxes for
the fiscal years ended August 31, 2020 and 2019 were approximately as follows:

Fiscal Year Ended August 31,

Tax computed at statutory rates
State income tax, net of federal benefit
Tax effect on equity in income of international joint ventures
Tax effect of foreign operations
Deemed repatriation
Research and development credit
Valuation allowance
Stock based compensation
Non-controlling interest
Other

2020

365,000
23,000
(888,000)
641,000
108,000
(368,000)
2,797,000
189,000
(55,000)
(138,000)

2,674,000

2019
1,398,000
27,000
(1,490,000)
672,000
204,000
(133,000)
133,000
208,000
(74,000)
(103,000)

842,000

The Company has not provided U.S. income taxes or foreign withholding taxes with respect to its portion of the cumulative
undistributed earnings of certain foreign subsidiaries and joint ventures that are essentially permanent in duration. As a
result of the 2017 tax law changes, U.S. federal income taxes on dividends received from the Company’s foreign
subsidiaries and joint ventures after December 31, 2017 have been generally eliminated. However, the Company continues
to be subject to foreign withholding taxes upon repatriation of any undistributed earnings that are not essentially permanent
in duration. The Company recorded a tax benefit of approximately $76,000 and tax expense of approximately $4,000
during fiscal 2020 and fiscal 2019, respectively, representing changes in the deferred tax liability for foreign withholding
taxes to be paid with respect to the portion of the cumulative undistributed earnings of foreign subsidiaries and joint
ventures that the Company determined were not essentially permanent in duration.

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the
temporary differences are expected to be recovered or paid. The tax effect of the temporary differences and tax
carryforwards comprising the net deferred taxes shown on the consolidated balance sheets as of August 31, 2020 and 2019
was approximately as follows:

Accrued compensation
Inventory costs
Other accrued expenses
Lease liability
Goodwill and other intangible assets
Stock-based compensation
Foreign tax credit carryforward
Other credit and loss carryforwards
Total deferred tax assets
Valuation allowance
Total deferred tax assets after valuation allowance
Property and equipment
Right-of-use asset
Other
Total deferred tax liabilities
Net deferred tax assets

August 31,

2020
173,500
64,000
74,900
147,500
581,200
397,300
5,790,500
4,824,200
12,053,100
(11,561,700)
491,400
(50,700)
(147,500)
(83,400)
(281,600)
209,800

2019
153,400
60,900
39,700
—
688,400
299,300
5,790,500
3,631,700
10,663,900
(8,764,300)
1,899,600
(111,900)
—
(153,400)
(265,300)
1,634,300

As of August 31, 2020, the Company had foreign tax credit carryforwards of approximately $5,790,500, which will begin
to expire if not utilized prior to August 31, 2021. In addition, the Company had federal and state tax credit carryforwards
of $3,312,400 as of August 31, 2020 which began to expire in fiscal 2021. These federal and state tax credit carryforwards
consist primarily of federal and Minnesota research and development credit carryforwards. The Company also has a
deferred tax asset of $1,260,600 for federal and state net operating loss carryforwards as of August 31, 2020. The federal
net operating loss carryforward has an indefinite carryforward period. The Company has a deferred tax asset of $251,200
for foreign net operating loss carryforwards, $229,200 of which has an indefinite carryforward period.

The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to be realized when it
is more likely than not that some portion or all of its deferred tax assets will not be realized.

As of August 31, 2020, the Company determined based on all available evidence, including historical data and projections
of future results, that it is more likely than not that its domestic deferred tax assets, including its foreign tax credit
carryforward and federal and Minnesota research and development credit carryforwards will not be realized. The Company
determined that its domestic deferred tax assets, including its federal and state net operating loss carryforwards, foreign tax
credit carryforwards, and federal and Minnesota research and development credit carryforwards will not be realized due to
the absence of objectively verifiable sources of taxable income. On the basis of this evaluation, the Company has recorded a
valuation allowance of $11,561,700 as August 31, 2020 to recognize only the portion of the deferred tax assets that is more
likely than not to be realized. The net deferred tax asset as of August 31, 2020 relates entirely to non-US deferred tax assets
which are expected to be realized by offset of deferred tax liability for withholding tax on cumulative undistributed
earnings in foreign subsidiaries and joint ventures that the Company determined were not essentially permanent.

As of August 31, 2019, the Company determined it was still in a position that a full valuation allowance was not necessary
and recorded a valuation allowance of $5,790,500 with respect to the foreign tax credit carryforwards and a valuation
allowance of $2,973,800 with respect to federal and state tax credit carryforwards that was determined would not be
utilized prior to expiration. The Company determined that its foreign tax credit carryforward would not be realized due to
insufficient foreign source taxable income within the carryforward period and the fact that for ordering purposes the foreign
tax credit carryforward is not allowed to be utilized until after any current year foreign tax credits are utilized. The
Company determined that its federal and Minnesota research and development credit carryforwards would not be realized
due to insufficient federal and Minnesota taxable income within the carryforward period after considering the foreign tax
credit utilization. The change in the valuation allowance totaled $2,797,000 and $133,000 for the years ended August 31,
2020 and 2019, respectively.

The following is a tabular reconciliation of the total amounts of approximated unrecognized tax benefits:

Gross unrecognized tax benefits – beginning balance
Gross increases – prior period tax positions
Gross increases – current period tax positions
Gross unrecognized tax benefits – ending balance

Fiscal Year Ended August 31,

2020

248,000
15,200
15,000
278,200

2019

242,000
1,000
5,000
248,000

The entire amount of unrecognized tax benefits would affect the effective tax rate if recognized. It is not expected that the
amount of unrecognized tax benefits will change significantly in the next 12 months.

The Company recognizes interest related to unrecognized tax benefits and penalties as income tax expense. Accrued
interest and penalties are included within the related tax liability line in the consolidated balance sheet. There was no
liability for the payment of interest and penalties as of both August 31, 2020 and August 31, 2019.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions,
as of August 31, 2020, the Company is no longer subject to federal, state, local, or foreign examinations by tax authorities
for years prior to August 31, 2017.

15.

COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company currently has operating leases for various buildings, equipment and vehicles. These leases are under non-
cancelable operating lease agreements with expiration dates between November 30, 2020 and June 30, 2024. The
Company has the option to extend certain leases to five or ten-year term(s) and has the right of first refusal on any sale.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time
associated with the lease payments. The Company records its long-term operating leases as right-of-use assets. Upon
initial adoption, using the modified retrospective transition approach, no leases with terms less than 12 months have been
capitalized to the consolidated balance sheet consistent with ASC 842. Instead, these leases are recognized in the
consolidated statement of operations on a straight-line expense throughout the lives of the leases. None of the Company’s
leases contain common area maintenance or security agreements.

The Company has made certain assumptions and judgments when applying ASC 842, the most significant of which is that
the Company elected the package of practical expedients available for transition that allow the Company to not reassess
whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or
existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
Additionally, the Company did not elect to use hindsight when considering judgments and estimates such as assessments of
lessee options to extend or terminate a lease or purchase the underlying asset. The Company has no contingent rent
agreements.

Present Value of Leases

(in thousands):
Right-of-use assets, net

Current portion of lease liability
Lease liability, less current portion

Total lease liability

August 31, 2020
658,788

386,345
272,443
658,788

As of August 31, 2020, the weighted-average remaining lease term was 2.02 years. The Company’s lease agreements do
not provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, as of August
31, 2020, the Company estimates the weighted-average discount rate for its operating leases to be 2.31% to present value
based on the incremental borrowing rate.

Future minimum payments for the next five fiscal years and thereafter as of August 31, 2020 under these long-term
operating leases are as follows (in thousands):

Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024

Total future minimum lease payments

Less amount representing interest

Present value of obligations under operating leases

Less current portion

Long-term operating lease obligations

$ 386,345
208,419
59,993
19,932
674,689
(15,901)
658,788
(386,345)
$ 272,443

The following table presents future minimum lease payments for the Company’s operating leases as of August 31, 2019
under ASC 840 and is being presented for comparative purposes:

Fiscal 2020
Fiscal 2021
Fiscal 2022
Total future minimum rent $

286,723
241,035
107,522
635,280

Rent expense under these leases was approximately $131,840 for the year ended August 31, 2019.

Annual Bonus Plan

On August 27, 2020, the Compensation Committee of the Board of Directors of the Company approved the material terms
of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year
ending August 31, 2021. For fiscal 2021, as in past years, the total amount available under the bonus plan for all plan
participants, including executive officers, is dependent upon the Company’s earnings before interest, taxes, and other
income, as adjusted to take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted
EBITOI). Each plan participant’s percentage of the overall bonus pool is based upon the number of plan participants, the
individual’s annual base salary, and the individual’s position and level of responsibility within the company. In the case of
each of the Company’s executive officer participants, 75% of the amount of their individual bonus payout will be
determined based upon the Company’s actual EBITOI for fiscal 2021 compared to a pre-established target EBITOI for
fiscal 2021, and 25% of the payout will be determined based upon such executive officer’s achievement of certain pre-
established individual performance objectives. The payment of bonuses under the plan is discretionary, and bonuses may
be paid to executive officer participants in both cash and shares of NTIC common stock, the exact amount and percentages
of which were determined by the Company’s Board of Directors, upon recommendation of the Compensation Committee,
after the completion of the Company’s consolidated financial statements for fiscal 2021.

On August 31, 2019, the Compensation Committee of the Board of Directors of the Company approved the material terms
of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year
ending August 31, 2020. $1,300,000 was recognized for bonuses for the fiscal year ended August 31, 2020, $800,000 of
the bonus is comprised of stock options granted to management on September 1, 2019 and $500,000 will be paid out in
cash and profit sharing subsequent to year end. This is compared to $2,000,000 recognized for bonuses for the fiscal year
ended August 31, 2019, $800,000 of the bonus comprised of stock options granted to management on September 1, 2018
and $1,200,000 was paid out in cash and profit sharing subsequent to year end.

Concentrations

Five joint ventures (consisting of the Company’s joint ventures in the United States, Indonesia, Philippines, Russia and
India) accounted for 88.2% of the Company’s trade joint venture receivables as of August 31, 2020, and five joint ventures
(consisting of the Company’s joint ventures in South Korea, Thailand, France, Germany and India) accounted for 69.6% of
the Company’s trade joint venture receivables as of August 31, 2019.

Legal Matters

On March 23, 2015, NTIC and NTI Asean LLC, a majority-owned subsidiary of NTIC, filed a lawsuit in Tianjin No 1
Intermediate People’s Court against two individuals, Tao Meng and Xu Hui, related to breaches of duties and contractual
commitments owed to NTI Asean under certain agreements related to NTIC’s former joint venture in China, Tianjin Zerust
Anti-Corrosion Technologies Ltd. The lawsuit alleges, among other things, that Mr. Tao Meng and Xu Hui have engaged
in self-dealing, usurped business opportunities, and received economic benefits that were required to go to Tianjin Zerust.
At this point, the Company is not able to reasonably estimate the amount of any recovery to NTI Asean, if any.

From time to time, the Company is subject to various other claims and legal actions in the ordinary course of its business.
The Company records a liability in its consolidated financial statements for costs related to claims, including future legal
costs, settlements, and judgments, where the Company has assessed that a loss is probable, and an amount could be
reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable

estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount.
The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if
there is a reasonable possibility that material loss may have been incurred. In the opinion of management, as of August 31,
2020, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect
the Company’s consolidated results of operations, financial position, or cash flows.

16.

STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information consist of:

Cash paid during the year for income tax
Cash paid during the year for interest

Fiscal Year Ended
August 31,

2020
$1,099,635
16,034

2019

$ 841,837
13,567

Non-cash investing and financing activities:
Purchases of property and equipment included in
accounts payable

—

53,512

17.

FAIR VALUE MEASUREMENTS

The Company follows the authoritative guidance on fair value measurements and disclosures with respect to assets and
liabilities that are measured at fair value on both a recurring and non-recurring basis. Under this guidance, fair value is
defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy
for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market
participants would use in valuing the asset or liability, developed based on market data obtained from sources independent
of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market
participants would use in valuing the asset or liability developed based upon the best information available in the
circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon
the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into three levels defined as follows:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or

similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are
observable for the asset or liability, either directly or indirectly.

Level 3 - Inputs are unobservable for the asset or liability.

See the section below titled Valuation Techniques for further discussion of how the Company determines fair value for
investments.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

Assets and liabilities that are measured at fair value on a recurring basis primarily relate to marketable equity securities.
These items are marked-to-market at each reporting period, and the Company estimates that market value approximates
costs.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring
basis:

Fair value as of
August 31, 2020
5,544,722

Fair value as of
August 31, 2019
3,565,258

Fair Value Measurements
Using Inputs Considered as

Level 1
$ 5,544,722

Level 2
$ —

Level 3
$ —

Fair Value Measurements
Using Inputs Considered as

Level 1
$ 3,565,258

Level 2
$ —

Level 3
$ —

Available for sale securities

Valuation Techniques

Financial assets that are classified as Level 1 securities include cash equivalents and available for sale securities. These are
valued using quoted market prices in an active market.

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe
valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The
Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal
quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers
between Level 1, Level 2, or Level 3 during the fiscal years ended August 31, 2020 or August 31, 2019. When a
determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the
unobservable inputs to the overall fair value measurement.

Item 9.
FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

None

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

NTIC maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that information required to be
disclosed by NTIC in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules
and forms and that such information is accumulated and communicated to NTIC’s management, including NTIC’s principal
executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. NTIC’s management evaluated, with the participation of its Chief Executive
Officer and its Chief Financial Officer, the effectiveness of the design and operation of NTIC’s disclosure controls and
procedures as of the end of the period covered in this report. Based on that evaluation, NTIC’s Chief Executive Officer and
Chief Financial Officer concluded that NTIC’s disclosure controls and procedures were effective as of the end of such
period to provide reasonable assurance that information required to be disclosed in the reports that NTIC files or submits
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to NTIC’s management, including NTIC’s
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

Management’s Report on Internal Control over Financial Reporting

NTIC’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for Northern Technologies International Corporation
and its subsidiaries. This system is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting
principles.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and
even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation
and presentation. In addition, projection of any evaluation of the effectiveness of internal control over financial reporting to
future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Management, with the participation of NTIC’s President and Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company’s internal control over financial reporting as of August 31, 2020. In making this
evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control – Integrated Framework (2013). Based on this assessment, management concluded that the
Company's internal control over financial reporting was effective as of August 31, 2020.

This report does not include an attestation report of NTIC’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by NTIC’s independent
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit NTIC to
provide only management’s report in this report.

Changes in Internal Control over Financial Reporting

There was no change in NTIC’s internal control over financial reporting that occurred during the quarter ended August 31,
2020 that has materially affected or is reasonably likely to materially affect NTIC’s internal control over financial
reporting.

Item 9B. OTHER INFORMATION

Not applicable.

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

Directors

The information in the “Proposal One – Election of Directors” section of NTIC’s definitive proxy statement to be filed with
the Securities and Exchange Commission with respect to NTIC’s next annual meeting of stockholders, which involves the
election of directors, is incorporated in this annual report on Form 10-K by reference.

Executive Officers

Information concerning NTIC’s executive officers and officers is included in this annual report on Form 10-K under Item
4A of Part I under the heading “Executive Officers of the Registrant.”

Code of Ethics

NTIC has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal
accounting officer, or controller or persons performing similar functions, as well as other employees and NTIC’s directors
and meets the requirements of the SEC and the Nasdaq Global Market. A copy of NTIC’s Code of Ethics is filed as an
exhibit to this report. NTIC intends to satisfy the disclosure requirements of Item 5.05 of Form 8-K regarding amendments
to or waivers from any provision of its code of ethics by posting such information on its corporate website at
www.ntic.com.

Changes to Nomination Procedures

During the fourth quarter of fiscal 2020, NTIC made no material changes to the procedures by which stockholders may
recommend nominees to NTIC’s Board of Directors, as described in NTIC’s most recent proxy statement.

Audit Committee Matters

The information in the “Corporate Governance—Audit Committee” section of NTIC’s definitive proxy statement to be
filed with the Securities and Exchange Commission with respect to NTIC’s next annual meeting of stockholders, which
involves the election of directors, is incorporated in this annual report on Form 10-K by reference.

Item 11.

EXECUTIVE COMPENSATION

The information in the “Director Compensation” and “Executive Compensation” sections of NTIC’s definitive proxy
statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual meeting of
stockholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by reference.

Item 12.
RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

Stock Ownership

The information in the “Stock Ownership—Beneficial Ownership of Significant Stockholders and Management” section of
NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next
annual meeting of stockholders, which involves the election of directors, is incorporated in this annual report on Form 10-K
by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes outstanding options and other awards under NTIC’s equity compensation plans as of
August 31, 2020. NTIC’s equity compensation plans as of August 31, 2020 were the Northern Technologies International
Corporation 2019 Stock Incentive Plan, the Northern Technologies International Corporation Amended and Restated 2007
Stock Incentive Plan, and the Northern Technologies International Corporation Employee Stock Purchase Plan. Except for
automatic annual grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s directors in
consideration for their services as directors of NTIC and an automatic annual grant of $10,000 in options to purchase shares
of NTIC common stock to NTIC’s Chairman of the Board in consideration for his services as Chairman, in each case on the
first day of each fiscal year, and automatic initial pro rata grants of $50,000 in options to purchase shares of NTIC common
stock to NTIC’s new directors in consideration for their services as directors of NTIC on the first date of their appointment
as directors, options and other awards granted in the future under the Northern Technologies International Corporation 2019
Stock Incentive Plan are within the discretion of the Board of Directors and the Compensation Committee of the Board of
Directors and, therefore, cannot be ascertained at this time. No future grants of options or other stock awards will be made
under the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan.

(a)

(b)

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))

1,127,968(1)(2)

—
1,127,968(1)(2)

$9.63

—
$9.63

583,923(3)

—

583,923(3)

Plan Category

Equity compensation plans
approved by security holders

Equity compensation plans not
approved by security holders

Total

______________________
*Share and per share data have been adjusted for all periods presented to reflect the two-for-one stock split effective June 28, 2019.

(1) Amount includes 827,198 shares of NTIC common stock issuable upon the exercise of stock options outstanding as of
August 31, 2020 under the Northern Technologies International Corporation Amended and Restated 2007 Stock
Incentive Plan and 300,770 shares of NTIC common stock issuable upon the exercise of stock options outstanding as
of August 31, 2020 under the Northern Technologies International Corporation 2019 Stock Incentive Plan.

(2) Excludes employee stock purchase rights accruing under the Northern Technologies International Corporation

Employee Stock Purchase Plan. Under such plan, each eligible employee may purchase up to 2,000 shares of NTIC
common stock at semi-annual intervals on February 28th or 29th (as the case may be) and August 31st each year at a
purchase price per share equal to 90% of the lower of (i) the closing sales price per share of NTIC common stock on
the first day of the offering period or (ii) the closing sales price per share of NTIC common stock on the last day of the
offering period.

(3) Amount includes 499,230 shares available as of August 31, 2020 for future issuance under Northern Technologies
International Corporation 2019 Stock Incentive Plan and 84,693 shares available at August 31, 2020 for future
issuance under the Northern Technologies International Corporation Employee Stock Purchase Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information in the “Related Person Relationships and Transactions” and “Corporate Governance—Director
Independence” sections of NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission
with respect to NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated in this
annual report on Form 10-K by reference.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information in the “Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm—
Audit, Audit-Related, Tax and Other Fees” and “Proposal Three—Ratification of Selection of Independent Registered
Public Accounting Firm—Audit Committee Pre-Approval Policies and Procedures” sections of NTIC’s definitive proxy
statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual meeting of
stockholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by reference.

PART IV

Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

NTIC’s consolidated financial statements are included in Item 8 of Part III of this report.

Financial Statement Schedules

All financial statement schedules are omitted because they are inapplicable since NTIC is a smaller reporting company.

Exhibits

The exhibits being filed or furnished with this report are listed below. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report is asterisked below.

A copy of any exhibits listed or referred to herein will be furnished at a reasonable cost to any person who is a stockholder
upon receipt from any such person of a written request for any such exhibit. Such request should be sent to: Mr. Matthew
Wolsfeld, Corporate Secretary, Northern Technologies International Corporation, 4201 Woodland Road, P.O. Box 69,
Circle Pines, Minnesota 55014 Attn: Stockholder Information.

Item No.
3.1

Item
Restated Certificate of Incorporation of Northern
Technologies International Corporation

3.2

3.3

Certificate of Amendment to the Restated
Certificate of Incorporation of Northern
Technologies International Corporation dated
January 16, 2018

Certificate of Validation of the Certificate of
Amendment to Restated Certificate of
Incorporation of Northern Technologies
International Corporation dated January 18, 2019

3.4

Amended and Restated Bylaws of Northern
Technologies International Corporation

4.1

Specimen Stock Certificate Representing Common
Stock of Northern Technologies International
Corporation

Method of Filing
Incorporated by reference to Exhibit 3.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 28, 2009
(File No. 001-11038)

Incorporated by reference to Exhibit 3.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 16, 2018 (File No.
001-11038)

Incorporated by reference to Exhibit 3.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)

Incorporated by reference to Exhibit 3.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on November 24, 2008 (File
No. 001-11038)

Incorporated by reference to Exhibit 4.1 to
NTIC’s Registration Statement on Form 10
(File No. 001-19331) (Filed on paper -
hyperlink is not required pursuant to Rule
105 of Regulation S-T)

4.2

Description of Common Stock of Northern
Technologies International Corporation

Filed herewith

Item No.
10.1

Item
Northern Technologies International Corporation
2019 Stock Incentive Plan*

10.2

Form of Incentive Stock Option Agreement for
Northern Technologies International Corporation
2019 Stock Incentive Plan*

10.3

Form of Non-Statutory Stock Option Agreement
for Northern Technologies International
Corporation 2019 Stock Incentive Plan*

10.4

Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan*

10.5

10.6

10.7

Form of Incentive Stock Option Agreement for
Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan*

Form of Non-Statutory Stock Option Agreement
for Northern Technologies International
Corporation Amended and Restated 2007 Stock
Incentive Plan*

Form of Restricted Stock Agreement for Northern
Technologies International Corporation Amended
and Restated 2007 Stock Incentive Plan*

10.8

Northern Technologies International Corporation
Employee Stock Purchase Plan*

10.9

Material Terms of Northern Technologies
International Corporation Annual Bonus Plan*

Method of Filing
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)

Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)

Incorporated by reference to Exhibit 10.3 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)

Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)

Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)

Incorporated by reference to Exhibit 10.3 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)

Incorporated by reference to Exhibit 10.4 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)

Incorporated by reference to Exhibit 10.11
to NTIC’s Annual Report on Form 10-KSB
for the fiscal year ended August 31, 2006
(File No. 001-11038)

Incorporated by reference to Exhibit 10.6 to
NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2015 (File
No. 001-11038)

Item No.
10.10

Item
Form of Indemnification Agreement between
Northern Technologies International Corporation
and its Directors and Officers*

10.11

Agreement dated as of May 25, 2009 between
Northern Technologies International Corporation
and Sunggyu Lee, Ph.D.*

10.12

Description of Non-Employee Director
Compensation Arrangements*

10.13

10.14

10.15

10.16

10.17

Executive Employment Agreement dated as of
November 18, 2011 between Northern
Technologies International Corporation and G.
Patrick Lynch*

Confidential Information, Inventions Assignment,
Noncompetition and Non-Solicitation Agreement
dated as of November 18, 2011 between Northern
Technologies International Corporation and G.
Patrick Lynch*

Executive Employment Agreement dated as of
November 18, 2011 between Northern
Technologies International Corporation and
Matthew C. Wolsfeld*

Amended and Restated Committed Line of Credit
Note dated as of January 10, 2011 issued by
Northern Technologies International Corporation to
PNC Bank, National Association

10.18

Loan Agreement dated as of January 10, 2011
between Northern Technologies International
Corporation and PNC Bank, National Association

Method of Filing
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on October 23, 2019 (File No.
001-11038)

Incorporated by reference to Exhibit 10.2 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended May 31, 2009 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.9 to
NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2018 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.13
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.14
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.15
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.16
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)

Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 12, 2011 (File No.
001-11038)

Incorporated by reference to Exhibit 10.6 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 12, 2011 (File No.
001-11038)

10.19

Waiver and First Amendment to Loan Documents
dated as of January 10, 2012 between Northern
Technologies International Corporation and PNC
Bank, National Association

Incorporated by reference to Exhibit 10.6 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2011
(File No. 001-11038)

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

Item No.
10.20

Item
Waiver and Second Amendment to Loan
Documents dated December 11, 2012 between
Northern Technologies International Corporation
and PNC Bank, National Association

Letter dated December 31, 2013 to Northern
Technologies International Corporation from PNC
Bank, National Association

Letter dated January 8, 2015 to Northern
Technologies International Corporation from PNC
Bank, National Association

Method of Filing
Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2012
(File No. 001-11038)

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 28, 2014
(File No. 001-11038)

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 28, 2015
(File No. 001-11038)

Amendment to Loan Documents dated January 6,
2016 by and between Northern Technologies
International Corporation from PNC Bank,
National Association

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 29, 2016
(File No. 001-11038)

Letter Agreement effective as of January 11, 2017
between PNC Bank, National Association and
Northern Technologies International Corporation

Letter Agreement effective as of January 5, 2018
between PNC Bank, National Association and
Northern Technologies International Corporation

Letter Agreement effective as of January 8, 2019
between PNC Bank, National Association and
Northern Technologies International Corporation

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2016
(File No. 001-11038)

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2017
(File No. 001-11038)

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2018
(File No. 001-11038)

Letter Agreement effective as of December 16,
2019 between PNC Bank, National Association
and Northern Technologies International
Corporation

Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2019
(File No. 001-11038)

Purchase and Sale Agreement dated as of July 14,
2014 between Northern Technologies International
Corporation and Glen Willow Holdings, LLC

Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on July 15, 2014 (File No.
001-11038)

Consulting Agreement dated January 11, 2017 by
and among Northern Technologies International
Corporation, BioPlastic Polymers LLC, and
Ramani Narayan, Ph.D.

Incorporated by reference to Exhibit 10.2 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2016
(File No. 001-11038)

14.1

Code of Ethics

Incorporated by reference to Exhibit 14.1 to
NTIC’s Annual Report on Form 10-KSB for
the fiscal year ended August 31, 2004 (File
No. 001-11038)

Method of Filing

Filed herewith

Furnished herewith

Filed herewith

Item No.

Item

21.1

Subsidiaries of the Registrant

23.1

Consent of Baker Tilly US, LLP

31.1

31.2

32.1

32.2

101

Certification of President and Chief Executive
Officer Pursuant to SEC Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

Certification of Chief Financial Officer Pursuant to
SEC Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of President and Chief Executive
Officer Pursuant to Rule 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer Pursuant to
Rule 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials from Northern
Technologies International Corporation’s Annual
Report on Form 10-K for the fiscal year ended
August 31, 2020, formatted in XBRL (Extensible
Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations, (iii) the Consolidated
Statements of Comprehensive Income (Loss), (iv)
the Consolidated Statements of Equity, (v) the
Consolidated Statements of Cash Flows, and (vi)
Notes to Consolidated Financial Statements

__________________________
*

A management contract or compensatory plan or arrangement.

Item 16. FORM 10-K SUMMARY

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION

November 13, 2020

By: /s/ G. Patrick Lynch

G. Patrick Lynch

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name

Title

Date

/s/ G. Patrick Lynch
G. Patrick Lynch

President and Chief Executive Officer and
Director
(principal executive officer)

November 13, 2020

/s/ Matthew C. Wolsfeld, CPA
Matthew C. Wolsfeld, CPA

Chief Financial Officer and Corporate Secretary
(principal financial and accounting officer)

November 13, 2020

/s/ Richard J. Nigon
Richard J. Nigon

/s/ Nancy E. Calderon
Nancy E. Calderon

/s/ Sarah E. Kemp
Sarah E. Kemp

/s/ Soo Keong Koh
Soo Keong Koh

/s/ Sunggyu Lee, Ph.D.
Sunggyu Lee, Ph.D.

/s/ Ramani Narayan, Ph. D.
Ramani Narayan, Ph.D.

/s/ Konstantin von Falkenhausen
Konstantin von Falkenhausen

Chairman of the Board

November 13, 2020

Director

Board of Directors
Mr. Richard J. Nigon
Chairman of the Board, NTIC
Senior Vice President, Cedar Point Capital, Inc.

Mr. G. Patrick Lynch
President & CEO, NTIC

Dr. Ramani Narayan
Distinguished Professor in the Department of
Engineering & Materials Science, Michigan State University

Dr. Sunggyu Lee
Chief Technologist, Chemtech Innovators LLC

Mr. Soo-Keong Koh
Managing Director, EcoSave Pte Ltd.

Mr. Konstantin von Falkenhausen
Partner, B Capital Partners AG

Ms. Sarah E. Kemp
Associate Vice President, Merck

Ms. Nancy E. Calderon
Former Global Lead Partner, KPMG LLP

NTIC Executive Officers
Mr. G. Patrick Lynch
President & CEO

Mr. Matthew C. Wolsfeld
Chief Financial Officer, Treasurer and Corporate Secretary

Independent Registered Public
Accounting Firm
Baker Tilly US, LLP
Minneapolis, MN

Transfer Agent and Registrar
For a response to questions regarding misplaced stock
certificates, changes of address or the consolidation
of accounts, please contact NTIC’s transfer agent:

Broadridge Corporate Issuer Solutions, Inc.
51 Mercedes Way
Edgewood, NY 11717
(855) 588-5049
shareholder@broadridge.com

Investor Relations
Northern Technologies International Corporation
welcomes inquiries from its stockholders and other
interested investors. For further information on
NTIC’S activities or additional copies of this report,
please contact:

Investor Relations
Northern Technologies International Corporation
4201 Woodland Road, P.O. Box 69
Circle Pines, MN 55014
(763) 225-6600
investors@ntic.com
www.ntic.com

Stock Listing
NTIC’s common stock is traded on the
Nasdaq Global Market under the symbol NTIC.

Annual Meeting
The annual meeting of stockholders will be held at
11:00 am (local time) on Friday, January 15, 2021 at
NTIC’s corporate headquarters:

Northern Technologies International Corporation
4201 Woodland Road
Circle Pines, MN 55014
(763) 225-6600